July 24, 2008 marks another federal minimum wage change; the second in a three phase increase. Last July, the minimum wage increased to $5.85 per hour. On July 24th the minimum wage will increase again to $6.55 per hour. And next July, the minimum wage will rise, for the final scheduled increase, to $7.25 per hour.

With the impending change, many states have also decided to raise their minimum wage rate to match the federal minimum wage. Other states have decided to adopt a minimum wage that is higher than the federal minimum in order to adjust to the rising cost of living and to meet the needs of their citizens. Check your state minimum wage rates in our State & Federal Laws section.

The minimum wage requirement is governed by the Fair Labor Standards Act (FLSA), which regulates minimum wage, overtime, equal pay, recordkeeping, and child labor practices. The provision requires employers to pay all non-exempt employees at least a minimum hourly rate.

Below are some tips to keep in mind to ensure compliance with your minimum wage requirements:

  1. Check your state minimum wage rate. Your state may establish a greater minimum wage rate than the federal requirement; employers are required to comply with the rate, state or federal, that provides for a higher minimum wage to be paid to the employee. For example, the state of Connecticut has a minimum wage of $7.65; therefore since the federal minimum wage is less, employers operating in the state of Connecticut are required to pay their employees a minimum hourly rate of $7.65.
  2. Post required labor posters. All employers are required to post the federal minimum wage poster; many states require employers to post their state minimum wage posters as well. Labor posters should be posted in a conspicuous and easily accessible area of the workplace, such as break rooms, time clock areas, or the reception room. Your state and federal posting requirements can be found in the State & Federal Resources area of the website, free of charge.

  3. Pay at least the minimum wage. An obvious requirement under the minimum wage rule is that employers must pay non-exempt employees at least the minimum wage per hour. Exempt employees are not required to be paid a minimum hourly rate; however, they must meet certain weekly salary requirements.
  4. Exemptions. Besides employees classified as exempt, there are a few other employee classifications that are not subject to the minimum wage requirement. Full-time students employed in retail or service stores, agriculture, or colleges and universities may be paid sub-minimum wages. Employers hiring students can obtain a certificate from the Department of Labor (DOL) which allows the student to be paid not less than 85 percent of the minimum wage. In addition, the DOL may issue certificates allowing employment at wages below the minimum for apprentices, learners, messengers, certain employees who receive tips, and workers with disabilities.
  5. Tip credits. Employees working primarily for tips (the federal law defines these workers as those that receive more than $30 per month in tips) may be paid less than the minimum hourly rate so long as each employee earns enough in tips to make up the difference between the wages paid and the federal minimum wage. The federal law states employees regularly receiving tips may be paid an hourly rate of $4.42 per hour (as of July 24, 2008). Remember, your state requirements may be different for tip credits, please check the State & Federal Labor Laws Minimum Wage section for details.
  1. Living wage. A living wage is a pay rate above the minimum wage that is considered to be sufficient to meet the basic needs of citizens in a particular geographic area. Cities or counties with living wages must pay city workers and employees of companies benefiting from city contracts, subsidies, or actions a “living wage” that is in excess of federal and state statutory requirements. These employers must also comply with other provisions of the living wage ordinance, which may require offering health benefits, providing leave, and posting notices regarding local living wages.
  1. Prevailing wage. Prevailing wages must be paid by employers with federal contractors. Prevailing wages are the rate of pay and fringe benefits determined by the DOL to be the norm for each classification of laborers in particular geographic areas for particular types of projects. These wages are calculated by surveying local rates of pay and costs of living standards in the applicable jurisdiction.

The Department of Labor uses a variety of remedies to enforce compliance with FLSA requirements. If violations are found, changes in employment practices are needed in order to bring the employer into compliance with the Act’s provisions and punitive fines are often incurred. In addition, the employer may be required to pay any back wages due to employees. Understanding your minimum wage and FLSA requirements will be your best defense against these types of sanctions.