What Is The Minimum Wage? Who Is Entitled To Overtime Pay?

What Is The Minimum Wage? Who Is Entitled To Overtime Pay?

Important Things Employees Should Know About The Minimum Wage, Overtime Pay, And The Fair Labor Standards Act 

Kehoe Law Firm, P.C. is making employees aware that the Fair Labor Standards Act (“FLSA”) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in federal, state, and local governments.

Covered nonexempt workers are entitled to a minimum wage of not less than $7.25 per hour effective July 24, 2009. Overtime pay at a rate not less than one and one-half times the regular rate of pay is required after 40 hours of work in a workweek.

Minimum Wage

The federal minimum wage provisions are contained in the FLSA. The federal minimum wage is $7.25 per hour effective July 24, 2009. Many states also have minimum wage laws. Some state laws provide greater employee protections; employers must comply with both.

The FLSA does not provide wage payment collection procedures for an employee’s usual or promised wages or commissions in excess of those required by the FLSA. However, some states do have laws under which such claims (sometimes including fringe benefits) may be filed.

Basic Wage Standards

Covered, nonexempt workers are entitled to a minimum wage of $7.25 per hour effective July 24, 2009. Special provisions apply to workers in American Samoa and the Commonwealth of the Northern Mariana Islands. Nonexempt workers must be paid overtime pay at a rate of not less than one and one-half times their regular rates of pay after 40 hours of work in a workweek.

Wages required by the FLSA are due on the regular payday for the pay period covered. Deductions made from wages for such items as cash or merchandise shortages, employer-required uniforms, and tools of the trade, are not legal to the extent that they reduce the wages of employees below the minimum rate required by the FLSA or reduce the amount of overtime pay due under the FLSA.

The FLSA contains some exemptions from these basic standards. Some apply to specific types of businesses; others apply to specific kinds of work.

While the FLSA does set basic minimum wage and overtime pay standards and regulates the employment of minors, there are a number of employment practices which the FLSA does not regulate.

For example, the FLSA does not require:

  1. vacation, holiday, severance, or sick pay;
  2. meal or rest periods, holidays off, or vacations;
  3. premium pay for weekend or holiday work;
  4. pay raises or fringe benefits; or
  5. a discharge notice, reason for discharge, or immediate payment of final wages to terminated employees.

The FLSA does not provide wage payment or collection procedures for an employee’s usual or promised wages or commissions in excess of those required by the FLSA. However, some States do have laws under which such claims (sometimes including fringe benefits) may be filed.

Also, the FLSA does not limit the number of hours in a day or days in a week an employee may be required or scheduled to work, including overtime hours, if the employee is at least 16 years old.

The above matters are for agreement between the employer and the employees or their authorized representatives.

Covered Employees

All employees of certain enterprises having workers engaged in interstate commerce, producing goods for interstate commerce, or handling, selling, or otherwise working on goods or materials that have been moved in or produced for such commerce by any person, are covered by the FLSA.

A covered enterprise is the related activities performed through unified operation or common control by any person or persons for a common business purpose and —

  1. whose annual gross volume of sales made or business done is not less than $500,000 (exclusive of excise taxes at the retail level that are separately stated); or
  2. is engaged in the operation of a hospital, an institution primarily engaged in the care of the sick, the aged, or the mentally ill who reside on the premises; a school for mentally or physically disabled or gifted children; a preschool, an elementary or secondary school, or an institution of higher education (whether operated for profit or not for profit); or
  3. is an activity of a public agency.

Any enterprise that was covered by the FLSA on March 31, 1990, and that ceased to be covered because of the revised $500,000 test, continues to be subject to the overtime pay, child labor and recordkeeping provisions of the FLSA.

Employees of firms which are not covered enterprises under the FLSA still may be subject to its minimum wage, overtime pay, recordkeeping, and child labor provisions if they are individually engaged in interstate commerce or in the production of goods for interstate commerce, or in any closely-related process or occupation directly essential to such production.

Such employees include those who work in communications or transportation; regularly use the mails, telephones, or telegraph for interstate communication, or keep records of interstate transactions; handle, ship, or receive goods moving in interstate commerce; regularly cross State lines in the course of employment; or work for independent employers who contract to do clerical, custodial, maintenance, or other work for firms engaged in interstate commerce or in the production of goods for interstate commerce.

Domestic service workers such as day workers, housekeepers, chauffeurs, cooks, or full-time babysitters are covered if:

  1. their cash wages from one employer in calendar year 2010 are at least $1,700 (this calendar year threshold is adjusted by the Social Security Administration each year); or
  2. they work a total of more than 8 hours a week for one or more employers.
Tipped Employees

Tipped employees are individuals engaged in occupations in which they customarily and regularly receive more than $30 a month in tips. The employer may consider tips as part of wages, but the employer must pay at least $2.13 an hour in direct wages.

The employer who elects to use the tip credit provision must inform the employee in advance and must be able to show that the employee receives at least the applicable minimum wage (see above) when direct wages and the tip credit allowance are combined. If an employee’s tips combined with the employer’s direct wages of at least $2.13 an hour do not equal the minimum hourly wage, the employer must make up the difference. Also, employees must retain all of their tips, except to the extent that they participate in a valid tip pooling or sharing arrangement.

Overtime Pay

The federal overtime provisions are contained in the FLSA. Unless exempt, employees covered by the FLSA must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay. There is no limit in the FLSA on the number of hours employees aged 16 and older may work in any workweek. The FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime is worked on such days.

The FLSA applies on a workweek basis. An employee’s workweek is a fixed and regularly recurring period of 168 hours — seven consecutive 24-hour periods. It need not coincide with the calendar week, but may begin on any day and at any hour of the day. Different workweeks may be established for different employees or groups of employees. Averaging of hours over two or more weeks is not permitted. Normally, overtime pay earned in a particular workweek must be paid on the regular pay day for the pay period in which the wages were earned.

On May 20, 2020, the Department of Labor announced a final rule that allows employers to pay bonuses or other incentive based pay to salaried, nonexempt employees whose hours vary from week to week. The final rule clarifies that payments in addition to the fixed salary are compatible with the use of the fluctuating workweek method under the FLSA. For more information, see www.dol.gov/agencies/whd/overtime/fww.

On May 18, 2020, the U.S. Department of Labor announced a final rule to withdraw the partial lists of establishments that lack or may have a “retail concept” under the FLSA. For more information, click www.dol.gov/agencies/whd/overtime/2020-7i.

On December 12, 2019, the U.S. Department of Labor announced a Final Rule that will allow employers to more easily offer perks and benefits to their employees. For more information, click www.dol.gov/agencies/whd/overtime/2019-regular-rate.

On September 24, 2019, the U.S. Department of Labor announced a final rule to make 1.3 million American workers eligible for overtime pay. For more information, click www.dol.gov/agencies/whd/overtime2019/index.

Calculating Overtime Pay

Overtime must be paid at a rate of at least one and one-half times the employee’s regular rate of pay for each hour worked in a workweek in excess of the maximum allowable in a given type of employment. Generally, the regular rate includes all payments made by the employer to or on behalf of the employee (except for certain statutory exclusions). The following examples are based on a maximum 40-hour workweek applicable to most covered nonexempt employees.

  1. Hourly rate (regular pay rate for an employee paid by the hour) – If more than 40 hours are worked, at least one and one-half times the regular rate for each hour over 40 is due. Example: An employee paid $8.00 an hour works 44 hours in a workweek. The employee is entitled to at least one and one-half times $8.00, or $12.00, for each hour over 40. Pay for the week would be $320 for the first 40 hours, plus $48.00 for the four hours of overtime – a total of $368.00.
  2. Piece rate – The regular rate of pay for an employee paid on a piecework basis is obtained by dividing the total weekly earnings by the total number of hours worked in that week. The employee is entitled to an additional one-half times this regular rate for each hour over 40, plus the full piecework earnings. Example: An employee paid on a piecework basis works 45 hours in a week and earns $405. The regular rate of pay for that week is $405 divided by 45, or $9.00 an hour. In addition to the straight-time pay, the employee is also entitled to $4.50 (half the regular rate) for each hour over 40 – an additional $22.50 for the 5 overtime hours – for a total of $427.50.Another way to compensate pieceworkers for overtime, if agreed to before the work is performed, is to pay one and one-half times the piece rate for each piece produced during the overtime hours. The piece rate must be the one actually paid during nonovertime hours and must be enough to yield at least the minimum wage per hour.
  3. Salary – The regular rate for an employee paid a salary for a regular or specified number of hours a week is obtained by dividing the salary by the number of hours for which the salary is intended to compensate. The employee is entitled to an additional one-half times this regular rate for each hour over 40, plus the salary.

If, under the employment agreement, a salary sufficient to meet the minimum wage requirement in every workweek is paid as straight time for whatever number of hours are worked in a workweek, the regular rate is obtained by dividing the salary by the number of hours worked each week.

To illustrate, suppose an employee’s hours of work vary each week and the agreement with the employer is that the employee will be paid $480 a week for whatever number of hours of work are required. Under this agreement, the regular rate will vary in overtime weeks. If the employee works 50 hours, the regular rate is $9.60 ($480 divided by 50 hours). In addition to the salary, half the regular rate, or $4.80, is due for each of the 10 overtime hours, for a total of $528 for the week. If the employee works 60 hours, the regular rate is $8.00 ($480 divided by 60 hours). In that case, an additional $4.00 is due for each of the 20 overtime hours for a total of $560 for the week.

In no case may the regular rate be less than the minimum wage required by the FLSA.

If a salary is paid on other than a weekly basis, the weekly pay must be determined in order to compute the regular rate and overtime pay. If the salary is for a half month, it must be multiplied by 24 and the product divided by 52 weeks to get the weekly equivalent. A monthly salary should be multiplied by 12 and the product divided by 52.

Source: U.S. Department Of Labor, Wage and Hour Division (Last accessed 10.13.2021)

Kehoe Law Firm, P.C.