Non-exempt employees: minimum wage requirements

What is the federal minimum wage?

The federal minimum wage is currently $7.25 per hour.  Employers are not limited to paying non-exempt employees on an hourly basis.  Employers may pay employees on a salaried, piecework, commission, or other basis as long as the employee makes at least the equivalent of the minimum hourly rate for all hours worked.

What is the state minimum wage?

The following table shows the state minimum wage rates and illustrates the potential variations in state law.  It does not reflect other differences that might exist between the state and federal requirements.  Certain cities may also have additional required minimum wage rates applicable to employees within city limits. 

Remember, between federal and state/local law, the higher minimum wage must be paid.

Can employers pay younger employees less than minimum wage?

Under federal law, employers may pay an opportunity wage of $4.25 per hour to employees under 20 years of age for the first 90 calendar days of their employment.  This youth opportunity wage encourages employers to hire inexperienced, youth workers. 

This opportunity wage is not linked to training for employees.  The only requirement placed upon its use is that an employer may not displace any employees to make room for a lower-paid opportunity wage employee.  The prohibition on displacing employees extends to partial displacements such as reductions in hours, wages, or employment benefits.

An employer need not obtain any special certificates before taking advantage of the opportunity wage.

An employer who violates the opportunity wage provisions could be required to:

• reinstate the employee
• pay lost wages
• pay an amount equal to the lost wages in damages. 

Intentional violations subject the employer to fines of up to $10,000 and, for subsequent violations, up to six months imprisonment.

Are there other exceptions from paying the full minimum wage?    

There are exemptions from minimum wage requirements for:

• tipped employees
• learners and students
• messengers
• disabled individuals.

“Tipped” employees

Employers are permitted to pay $2.13 per hour in wages to tipped employees.  If the sum of $2.13 plus tips does not equal at least the minimum wage, the employer must make up the difference to ensure that each tipped employee makes at least the minimum wage.

An employee qualifies for the lower wage as a tipped employee if all of the following apply:

• the employee customarily and regularly receives more than $30 a month in tips
• and
• the tip credit claimed by the employer cannot exceed the amount of tips actually received by the tipped employee
• and
• all tips received by the tipped employee are to be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips
• and
• the employee declares those tips for tax purposes
• and
• the employer can establish by its records that, for each week where credit is taken, the employee earned the minimum wage when tips received were added to wages
• and
• the employer informs the employee of these rules.  Since the law does not specify how an employer should inform employees, the safest course of action is to:
  • communicate the above in writing
  • retain a copy of the notice in the employee’s personnel file
  • require the employee’s signature acknowledging receipt of this information.

Tips are the property of the employee and may not be maintained by the employer.  The only exception is a valid tip pooling arrangement.

Compulsory charges for service

Compulsory charges for service, such as 10% of the bill, imposed by the employer are not considered tips, even if this amount is distributed to the employees.  However, the amount distributed to the employee may be counted toward minimum wage.

“Tip pooling”

Tip-pooling arrangements are permitted under the FLSA.  These might include agreements where waiters share their tips with bussing staff, or where the employer collects and redistributes all tips on an agreed basis.  Tip pooling can only include those employees who customarily and regularly receive tips.  Employers must notify its employees of any required tip pool contribution amount.  The tips must be split equitably among the workers.  The amounts received by each employee under these arrangements are counted as that employee’s tips for purposes of the tip credit.  The employer may not retain any of the employee’s tips for any other purpose.

While tip-pooling arrangements are technically permissible, many pooling arrangements have come under fire in recent FLSA class actions. 

For a discussion of overtime for tipped employees, see How is overtime calculated for tipped employees?

“Learners” and students

The FLSA contains several provisions permitting students or learners to be employed at wages below the minimum wage.  Employers must apply for certificates from the Department of Labor to be eligible for these programs.

• Full‑time students in any educational institution who are at least 14 may be employed by retail or service establishments or in agriculture at 85% (currently $6.17) of the minimum wage.  The students are limited to working 20 hours per week when school is session, and 8 hours a day and 40 hours a week when school is not in session.  The Department of Labor uses various formulas to set limits on the number of students which can be employed by any given employer under this provision.  This information may be found in the regulations issued by the Department of Labor.
• Student‑learners are those employed on a part‑time basis under a bona fide school vocational training program.  Student‑learners may be paid 75% (currently $5.44) of the minimum wage.  The training program must be to learn a skilled occupation and employment of the students must not displace regular workers.  The combined number of hours of employment training and the number of hours of school instruction may not exceed 40 hours per week.  Student-learners may work up to 8 hours per day and 40 hours per week during the school year when school is not in session.
• Apprentices in skilled trades may be employed at sub‑minimum wages in an amount approved by the Department of Labor.  A skilled trade is one which:
  • requires at least one year of on‑the‑job training plus related instruction to learn
  • and
  • includes broad skills applicable throughout an industry
  • and
  • is not a sales, clerical, managerial, or professional position.
• The employment must be as a part of an apprenticeship agreement between an apprentice and either his employer or a joint apprenticeship committee of several employers.  Employers must apply for and obtain a certificate from the Department of Labor before hiring an apprentice at less than minimum wage.
• Learners are workers whose total experience over the past three years in an approved learner occupation is less than the learning period for that occupation.  Learner occupations are skilled occupations that require an appreciable training period.  Learners may be employed at sub‑minimum wages in an amount approved by the Department of Labor.  To be eligible, an employer must show it has tried to recruit experienced workers but none are available.

Messengers

Messengers who deliver letters and messages for a message delivery service may be employed at 95% of the minimum wage with the approval of the Department of Labor.  The Department of Labor considers applications based upon conditions in an industry as a whole, rather than conditions of individual employees or employers.  An employer must demonstrate payment of a sub‑minimum wage is necessary to prevent reduction of opportunities for employment in the industry and maintain or increase employment opportunities.

Disabled individuals

Employers are authorized to pay less than the applicable minimum wage to individuals whose earning capacity is impaired by physical or mental deficiencies or injuries if they first obtain a certificate to do so from the Department of Labor.  Under such a certificate, the employer must pay a rate “commensurate” with those paid non‑handicapped workers for essentially the same type, quality, and quantity of work.  The commensurate wage is based upon the worker’s productivity in proportion to the productivity of a non-disabled worker.  For example, the commensurate wage of a disabled worker who is 75% as productive as the average non‑disabled worker would be 75% of the wage paid to the non‑disabled worker.

Applications are available at: 

• www.dol.gov/whd/forms/pts_wh226.htm.

Commonly asked questions and answers

Q.  If an hourly staff worker earning $10 per hour is needed to help on a project where workers merely earn minimum wage, can the higher paid worker be paid at a lower rate for those hours he works on the special project?

A.  Yes.  Nothing in the FLSA would prevent an employer from paying a non‑exempt worker different rates for the work he or she performs (provided it is at least minimum wage).  The varying rates may, however, impact the employee’s overtime rate in the event he works over 40 hours per week.  See Regular rate for an employee who has two or more different rates of pay. Also, the employer should give notice to the employee regarding the different hourly rates for different types of work. 

Q.  May an employer pay the opportunity wage to any new employee?

A.  No.  The opportunity wage of $4.25 per hour may be paid for the first 90 calendar days of employment only to employees younger than 20 years of age who do not displace any higher‑wage employees.

Q.  Does an employer need to keep records for employees who are paid at the $2.13 hourly rate for tipped employees?

A.  Yes.  One of the requirements for an employee to qualify for the lower tipped employee wage is that the employer can establish by its records that, for each week, the employee earned the minimum wage when tips received were added to hourly wages.

Q.  Must an employer give written notice to tipped employees of the special rules for them?

A.  No.  The law requires only that the employer inform tipped employees of the rules.  However, the safest course of action is to communicate the rules in writing and to retain a copy of the communication.