Stay Updated! COVID-19 pandemic business resources hub »

5 Important Exceptions to Know Regarding Minimum Wage

On July 24th, 2009, the minimum wage was raised to $7.25. To employees, this meant another $2,000 per year added to their income, and to employers it meant an even larger headache. Minimum wage is the state and federal law that requires employers to pay their employees a minimum hourly wage. This wage is set up by the federal government, but each state, city, and county is free to impose it's own minimum wage or "living wage." The employer is held accountable to pay the highest--federal, state, or local wage.

Understanding the Relevant Law
The Fair Labor Standards Act (FLSA) increased the minimum wage over three years, 2009 being the last section of the law passed. The average employer must abide to the FLSA provisions if: (1) the business earns more than $500,000 in annual sales; or (2) if its employees conduct business between states, better known as interstate commerce. This includes calling, mailing, and shipping or receiving items to or from out-of-state.

Employee or Independent Contractor
The title you give a person working for a business, in terms of wage and employment, is based on factors analyzed by the Department of Labor (DOL). It is easy for an employer to be tempted to avoid taxing and minimum wage laws by identifying someone as an independent contractor. This may seem like a loop hole to many, but be prepared. If the work relationship identifies with DOL's employer-employee classification, the small business can be liable for back wages. This means the employer must pay the difference the employee should have been paid to what they were paid. The back wage will be paid over time for two or three years depending on whether the employer was knowingly trying to avoid FLSA.

With that being said, below are some important exceptions to the Federal Minimum Wage Law that will either benefit your business or the knowledge you should have with this law.

1. Full-time Students: If an employer hires a full-time student to work in service, retail, or at higher education institutions they can apply with the Department of Labor which will enable the employer to pay the students at least 85% of minimum wage. The student will not be able to work over twenty hours a week while school is in session but while school is on break they are able to work forty hours a week.

2. Under the age of Twenty: For the first 90 days on the job, the Youth Minimum Wage Program requires that the business employer pay workers under the age of twenty at least $4.25. After the 90 days, or when that employee turns twenty, the Federal Minimum Wage Law will apply. If you are considering hiring teenagers, this opens the opportunity to pay them less while they are proving their work abilities.

3. Employees receiving tips: The employees who regularly make more than $30 in tips per month are required to receive $2.13 in direct wages from the employer. If the amount of $2.13 plus the tips they receive equals minimum wage then the employee must receive all of their tips. In other words, that their tips cannot be split up with, for example, the kitchen staff.

4. Employees with disabilities: In circumstances where employers employ a person with disabilities they may apply for a sub-minimum wage certificate for compensating workers whose wage and productivity is impaired due to of their disability. 

5. Volunteers or interns: If the person is hired as a volunteer or unpaid intern, then the Federal Minimum Wage Law is not mandated. It is necessary that the worker is told or understands that they are volunteering or an unpaid intern to prevent unnecessary lawsuits. 

The increase of the minimum wage should be looked at in a positive light. Although, the employer is responsible to spend more money and taxes on payroll, they are also responsible for giving employees a better lifestyle. The more money they receive the more money they will spend in stores just like yours. The circle of payment will benefit you in time. It is important to know the law covering minimum wage because there are loopholes and there are consequences for trying to avoid the law. Being knowledgeable on both sides will benefit your business and keep you out of trouble.

Night Mode