Federal, State or Local Minimum Wage: Which Applies?

Unsure about wage rules that affect your employees? Consider consulting experienced counsel or HR professionals to ensure that your pay practices comply.

By Rebecca Morris

The Fair Labor Standards Act requires employers to pay non-exempt employees at least $7.25 per hour for all hours worked. However, many states and local jurisdictions have higher minimum wage rates. Employers subject to multiple minimum wage requirements often need to figure out which rate applies. Below we address some common minimum wage questions.

Q: In addition to the federal minimum wage, my state and city have their own minimum wage laws. Which rate applies?

A: If all three apply to the employee, you must comply with the rate most generous to the employee. For example, if your state minimum wage is $9.00 and the local minimum wage is $11.00, you must generally pay your non-exempt employees who work in that city at least $11.00 per hour, since it is higher than the state minimum wage of $9.00 and the federal minimum wage of $7.25.

Q: How do I determine whether a minimum wage applies?

A: The federal minimum wage applies to all employers and employees covered by the FLSA (see resources box). Although coverage may vary by jurisdiction, state and local minimum wage laws also typically apply to almost all employers and employees. However, some state and local minimum wage requirements apply only to businesses of a certain size, or employees who perform a certain number of work hours in that jurisdiction. Check your state and local law for details. If more than one minimum wage applies, you must comply with the highest rate.

Q: My business is located in a city with a $10.00 minimum wage but some of my employees perform their work in a nearby city with an $11.00 minimum wage. Which one applies to these employees?

A: Minimum wages are typically based on where the employee performs work. Therefore, if the applicable minimum wage where the employees work is $11.00 per hour, you must generally pay them at least that rate.

Q: What happens if I have employees who work some of their time in a city with a $10.00 minimum wage and some of their time in a city with an $11.00 minimum wage?

A: If both minimum wages would apply to the employee (and the state minimum wage is lower than both), you generally have two options:
- Pay them at least $10.00 per hour for the hours worked in the first city and at least $11.00 per hour for hours worked in the second city; or,
- Pay them $11.00 per hour for hours worked in both cities, which can ease the administrative burden of tracking two different hourly rates.

Q: I understand I must pay non-exempt employees at least the minimum wage for all hours worked. What is considered "hours worked?”

A: Under the FLSA, hours worked includes not only productive time (time actually spent working) but may also include certain nonproductive time, such as rest breaks, travel time and training time. For non-exempt employees, this time must be compensated at a rate no less than the highest applicable minimum wage.

Q: All of my employees are paid higher than the minimum wage for regular work time. Can I pay them the minimum wage for nonproductive time, such as the time they spend in training?

A: As long as the wage meets or exceeds the highest applicable minimum wage, you may pay a different wage for nonproductive time than you do for productive time. For example, if the employee's normal wage is $15.00 per hour and the highest applicable minimum wage is $11.50 per hour, you may pay them $11.50 per hour (but not lower) for time spent in training. It is a best practice, and a requirement in certain jurisdictions, to notify the employee in writing of the separate rate before they perform
nonproductive work.

Q: My city requires me to provide employees paid sick leave. My staff all earns more than the minimum wage. Can I pay them the minimum wage during paid sick leave?

A: State and local paid sick leave laws typically require employers to pay employees their normal rate of pay during paid sick leave. Check your state or local law for specific pay requirements.

Q: We just hired an employee at the minimum wage. Can I make deductions from his wages for the costs of supplying and cleaning his uniforms?

A: Under the FLSA, deductions from a non-exempt employee's wages for uniforms and associated maintenance must not bring the employee's pay below the minimum wage. Similarly, employers cannot require employees to pay for these costs without reimbursement if it would reduce their pay below the minimum wage. The requirement with respect to the maintenance of uniforms doesn't apply if the uniforms are:

- Made of "wash and wear" material,
- May be routinely washed and dried with other personal garments and,
- Do not require ironing or other special treatment.

Note: Some states prohibit employers from requiring employees to pay for any uniforms costs even if the employee is paid more than the minimum wage. Check your state law for details.

Q: We have experienced some accidental cash draw shortages, breakage, and loss of property. Can we make deductions from employees' pay for these incidents?

A: Under the FLSA, as with deductions for uniforms, these deductions may not bring non-exempt employees' pay below the minimum wage. Some states also prohibit or place additional restrictions on these types of deductions, so check your state law to ensure compliance.

Note: These deductions are never permitted for exempt employees. If you contemplate making deductions from your non-exempt employees' salaries, consider consulting with counsel.

Q: Can we pay young workers less than the minimum wage?

A: Under the FLSA, there is a special minimum of $4.25 per hour that applies to employees under the age of 20 during their first 90 consecutive calendar days of employment with an employer. After 90 days or once the employee turns 20, whichever occurs first, employers must pay these employees the full applicable minimum wage. Keep in mind that your state and/or city may have certain rules regarding the employment of minors, and may require a higher minimum wage for young workers.

Understand the federal, state, and local minimum wage rules that apply to your employees and consider consulting with experienced counsel or HR professionals to ensure that your pay practices comply. Additionally, be sure to post all applicable minimum wage notices in each work location.

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