What Is the Minimum Wage?

You probably think you know all about the Minimum Wage. It’s simple; the federal government sets a minimum hourly pay rate for all employees, right? Well, no, not exactly. Many people do not realize that some states actually set a higher minimum wage than the federal government. Some cities have set their own minimum wages as well, usually called a “living wage.” There are many exceptions to the rules, in which employees are not entitled to earn the minimum wage. For minimum wage to apply, you must meet the definition of employee in the first place, and many wage-related issues are left up to the employer’s kindness (or lack thereof).

Minimum Wage Laws

In 1938, Congress enacted the Fair Labor Standards Act, abbreviated as FSLA, to set the minimum wage. While the states had enacted minimum wage laws beginning in the early 1900s, these laws were designed specifically for female workers who were often paid much less than males. The US Supreme Court ruled the laws were unconstitutional, along with some federal laws trying to set a minimum wage. Finally, the Court approved of a minimum wage law in Washington. This paved the way for the enactment of a similar federal law. At that time, the FLSA set a wage of 25 cents an hour. In 1941 constitutional challenges to the law failed. Since then, the minimum wage has been updated to coincide with increases in the cost of living.

The FLSA regulates the minimum wage, overtime pay, recordkeeping rules, and youth employment standards. You can review the current minimum hourly wage by navigating to the US Department of Labor Website. [add link: http://www.dol.gov/whd/flsa/index.htm]

State Minimum Wage

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States that offer wages higher than the federally mandated minimum are generally located in the northeast and western states, with the exception of Florida. Many centrally located states set rates that match the federal wage, while a handful are actually lower than the federal wage. Some US territories are exempt from the minimum wage laws altogether. When state and federal laws conflict, eligible employees have the right to the higher wage.

Living Wage

A living wage is based on the cost of living, typically in an urban area. Because cities are often more expensive that suburban and rural communities, cities enact living wages to deter poverty. The ideal living wage will provide a certain acceptable minimum living standard for anyone working at least 40 hours per week.

Exceptions to Minimum Wage

So why would states set a wage lower than the federal minimum? It is not just an academic exercise. Some employees are not entitled to minimum wage, so the lower state wage would apply. For example, any business or non-profit organization with interstate commerce operations must provide the minimum wage to employees, but if operations remain entirely in state and revenues total less than $500,000, the federal minimum wage does not apply.

Certain occupations are protected from exemption to minimum wage laws, regardless of the organization’s size. Employees caring for the sick or mentally ill are free from exemption, such as hospital and clinic employees. Educational employees, including preschool teachers fall under similar rules. Special compensation rules also apply to state and local government employees like firefighters, police, volunteers and those who are compensated with time off instead of overtime wages. Overtime is defined by the law as any work hours above the standard 40 hour work week. Workers must be paid 1.5 times their current hourly rate of pay.

There is also a special exception made for employees under the age of 20. They are only entitled to minimum wage after the first 90 consecutive days of employment. Still other exceptions allow lower wages for disabled workers, full-time students and student-learners pursuing work-related certificates, whether they are under age 20 or not.

Certain occupations are also exempt from the Act. For instance, executive, administrative, professional and outside sales workers do not fall under the law, as long as they receive a regular salary and meet certain requirements.

Contracted Workers

Independent contractors are not entitled to the minimum wage because they do not meet the definition of “employee”. The “contractor” controls the means and methods for which a job is completed. “Employees” are told how and when to do the job. Since most people who work from home do so on a contracted basis, and the number of work at home employees is rising, the application of the minimum wage law is declining. This is evident on job boards all over the internet where employers offer miniscule wages for different types of clerical and creative jobs.

Unregulated Wage Issues

The Act does not regulate certain wage-related employment issues important to workers. For instance, there is no clear definition of what constitutes full-time or part-time employment. There are also no requirements for employers to offer severance, sick leave, vacation or extra holiday overtime pay.

Enforcement

It is up to the US Department of Labor Wage and Hour Division to enforce the Fair Labor Standards Act.  Government employee enforcement falls under the US Office of Personnel Management. The US Congress enforces the act for Legislative Branch employees.