Minimum Wage Law

Off-the-Clock Work

An employer’s failure to properly account for all hours worked by an employee may violate minimum wage laws. For example, if an employee who is compensated at the minimum wage performs off-the-clock work for which they are not compensated, the employee’s hourly rate will fall below the legally required minimum when off-the-clock hours worked are taken into account.

Tips

Federal labor law permits certain employers to apply a tip credit toward their minimum wage obligations to employees. Claiming a tip credit legally allows employers to reduce the minimum cash wage to as low as $2.13 per hour, when the amount of tips and cash wages add up to at least the federal minimum wage of $7.25 per hour.

Tips laws vary from state to state, however. California Labor Code Section 351 prohibits employers from applying any tip credit toward their minimum wage obligation to employees. California tipped employees are entitled to receive the California minimum wage, in addition to any and all tips they may receive.

Business Expenses

Business expenses – such as the cost of gas for a company car, a uniform, or repairs for work equipment damaged by an employee – may not be deducted from a nonexempt employee’s compensation if the deduction will result in the employee receiving less than the basic minimum rate per hour.

Federal minimum wage protections generally apply to employees who are nonexempt, a job classification determined by how much an employee is paid, how the employee is paid, and what kind of work the employee does.

In addition to exempt employees, exceptions to federal minimum wage laws may affect tipped workers, full-time students, young workers, student-learners, and workers with disabilities.

Tipped Employees in Hospitality Industries

As explained above, federal law permits employers to reduce an employee’s wages below minimum wage if the employee earns at least minimum wage when factoring in tips.

Full-Time Students

The FLSA permits employers in agriculture, service stores, or educational institutions that employ full-time students to obtain a certificate from the Department of Labor allowing the student to be paid 85% of the minimum wage ($6.16/hour). DOL certificates also limit the amount of hours a full-time student can work to 20 per week when school is in session and 40 per week when school is out of session.

Young Workers

Federal law allows employers to pay workers under 20 years of age a minimum wage of $4.25 per hour for their first 90 consecutive calendar days of their employment. The worker’s rate must be raised to the federal minimum wage rate after 90 days of employment or when the employee turns 20, whichever occurs first.

Student-Learners

Employers may also obtain a student-learner certificate from the federal Department of Labor in order to pay students at least 16 years old who are enrolled in vocational education at 75% of the federal minimum wage ($5.44/hour).

Workers with Disabilities

Employers may obtain a certificate from the federal Department of Labor to compensate workers with disabilities at a rate less than the minimum wage, if they can prove the disability impacts the worker’s ability to do the job and if they submit to recurrent testing of the employee’s skill level. The wage for workers with disabilities must also be commensurate, meaning proportional, to the person’s abilities and to the wages of people without disabilities.

Since 2013, the Service Employees International Union (SEIU), with other organized labor, has led the “Fight for 15,” a community and political movement initially created to raise wages for fast-food workers and which currently advocates for a $15 per hour minimum wage for low-wage workers across the nation. The movement has garnered support from political progressives and has spurred increases in minimum pay at corporations like Aetna, Facebook, the University of California, Ben & Jerry’s, and others.

Opponents of the movement have identified concerns that such dramatic wage increases will harm businesses and promote widespread job loss among the lowest-wage workers.

Currently, the minimum wage is $15 in Seattle, Washington, and other states and regions are on a path to a $15 minimum wage, including New York, Massachusetts, and regions of Montana, Pennsylvania, North Carolina, and Oregon.

In California, as of January 2017, minimum wage rates for companies with more than 25 employees and companies with less than 25 employees are scheduled to increase annually, by $.50 in 2018 and by $1 in each subsequent year until 2022 and 2023. At this rate, the California minimum wage will reach $15 for all workers in companies with more than 25 employees in 2022, and for all workers in companies with less than 25 employees in 2023.

However, even though increases are scheduled, the minimum wage doesn’t increase automatically; the IWC (the California agency responsible for issuing wage orders) must approve each increase. Likewise, federal minimum wage increases must be passed by Congress, which hasn’t voted to increase minimum wage since 2007.

• What is the current federal minimum wage?
  The federal minimum wage for 2018 is $7.25. It has been the same since 2009, and no increases are currently scheduled.
• Which state has the highest minimum wage in 2018?
  The state of Washington has the highest minimum wage, at $11.50 per hour.
• Which state has the lowest minimum wage in 2018?
  Georgia and Wyoming are tied for the lowest minimum wage at $5.15 per hour. These are the only two states that have set a lower minimum wage than the federal minimum ($7.25/hour). The federal minimum wage takes precedence over a lower state one, unless the worker is exempt from federal protection.
• Why can a state have a minimum wage below the federal requirements?
  The federal minimum wage ($7.25/hour) supersedes any state law providing a lower minimum wage. However, federal labor law exempts certain types of employees, including executives, administrators, salaried professionals, outside sales reps, computer programmers, and computer systems analysts. There may be situations where an employee is exempt from federal minimum wage, but qualifies for a lower state minimum wage. However, only two states (Georgia and Wyoming) have lower minimum wages than the federal one.
• What is the inflation adjusted minimum wage?
  The federal minimum wage is not adjusted for inflation. It has stayed the same, at $7.25 per hour, since 2009. If Congress were to pass a law updating the minimum wage to account for inflation, the federal minimum wage would be $8.23 (in 2017).
• Is minimum wage going up?
  On a federal level, no, minimum wage is not going up. It has stayed the same since 2009. However, many state-level minimum wages are scheduled to increase (typically in January or July of each year). Seven states have their minimum wages increase each year based on cost of living: Alaska, Florida, Missouri, Montana, New Jersey, Ohio, and South Dakota. Another fourteen states (and the District of Columbia) have enacted legislation with planned minimum wage increases for 2017: Arizona, Arkansas, California, Colorado, Connecticut, Hawaii, Maine, Maryland, Massachusetts, Michigan, New York, Oregon, Vermont, and Washington.

Jason Gibbs

Founding partner of Gibbs Law Group LLP, Eric Gibbs has been selected for the peer-reviewed list of Best Lawyers every year since 2012.

Steven Tindall

An employment-law litigator with over 20 years’ experience, Steven Tindall is well-acquainted with the intricacies of overtime law. His largest recovery in a single employment case is $29 million.

Linda Lam

Prior to joining us at Gibbs Law Group LLP, Linda Lam worked at a national employment law firm, where she represented workers in lawsuits to recover unpaid wages and benefits.

Steve Lopez

Steve has prosecuted a variety of complex employment cases involving misclassification of independent contractors. He is fluent in English and Spanish.

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