By Kathleen O’Day, EdD, SPHR

Part of your year-end planning should be to review any changes to state and municipality minimum wage changes that may occur, generally on 12/31/2014 or 1/1/2015, for locations where your company operates. No announced-to-date change to the Federal minimum wage regulations will occur in 2015. The current Federal minimum wage is $7.25 per hour for certain jobs, as enacted by an update to the Fair Labor Standards Act (FLSA) in 2009. However, some states and municipalities have enacted or will enact minimum wage increases for 2015. By Federal regulations, covered employees must be paid the higher rate, whether Federal, state, or municipal.

Background

The Federal minimum wage per hour worked covering certain positions was enacted in 1938 as part of the FLSA. Interestingly, the first Federal minimum wage was $0.25 per hour. The Department of Labor Wage & Hour Division (WHD) enforces Federal minimum wage regulations and publishes information about overtime pay standards. Refer to http://www.dol.gov/whd/ for more information. The state minimum wage for covered employees in Texas is currently $7.25 per hour, the same as the Federal minimum wage, and no changes for 2015 have been announced. In Florida, the 2014 state minimum wage is $7.93 per hour and will increase to $8.05, effective 1/1/2015. Minimum hourly rates for other states and municipalities may be found at http://jobsearch.about.com/od/increase/fl/minimum-wage-rates-2015.htm.

Note that some states and municipalities set different hourly rates for positions with qualified benefits coverages and those without qualified benefits coverages. In addition, Federal, state, and municipal regulations may set different minimum wages for “tipped” positions. Furthermore, the FLSA specifically excludes certain positions from coverage, such as babysitters on a casual basis, workers with disabilities, and farm workers.

Which Employees are Covered by Federal, State, or Municipal Minimum Wage Regulations

FLSA defines the positions that are covered by minimum hourly rates and those that are not. Generally, covered positions that are classified as non-exempt (NE) from FLSA must be paid the higher of the applicable minimum hourly rate and overtime. Covered positions classified as exempt from FLSA have their own weekly wage minimums and are not required to be paid overtime for hours worked over 40 in a work week. Note: certain states and/or municipalities may require overtime pay for NE employees that work more than certain hours in a work day. Also, be aware that the FLSA classifies certain positions, such as Outside Sales as exempt, and certain positions, such as Inside Sales, as NE.

A sound best practice approach to FLSA compliance is to establish E/NE classifications after a review of written job responsibilities in a job description and review of the salary basis for the position. Refer to http://www.flsa.com/coverage.html for guidance on position classifications. Refer to http://jobsearch.about.com/od/compensation/fl/compensation-faqs.htm for a FAQ Fact Sheet regarding various compensation topics and definitions, such as pay and minimum wages.

A second best practice regarding pay and overtime administration is to have written policies and procedures that document company practices. In addition, appropriate supervisor training should be introduced immediately to new supervisors and be provided regularly after that on an ongoing basis.

Misclassifications and/or failure to properly pay employees are often referred to as “wage theft,” whether through willful or “sloppy” practices. Employee lawsuits and/or investigations by Federal or state regulators can result in costly fines, back pay awards, and attorney fees for large and small employers. Typically, “wage theft” claims are for alleged underpayment or nonpayment of wages in compliance with FLSA and state or municipal wage and hour regulations. David Weil, the director of the DOL’s wage and hour division, claims the WHD has uncovered nearly $ 1B in unpaid or illegally paid cases since 2010. The NY Attorney General claims NY has recovered $ 17M in wage claims since 2011. (http://www.nytimes.com/2014/09/01/business/more-workers-are-claiming-wage-theft.html?_r=0). In 2014, a Maryland decision determined that employers may be liable for treble damages under FLSA and MD wage and hour regulations. http://www.jdsupra.com/legalnews/employees-in-maryland-can-now-get-treble-57442/

Employers should be vigilant about monitoring pay practices for compliance with Federal, state and municipal wage and hour regulations, which may change from time to time. The Hopkins Group provides consulting services on compensation matters, including research about competitive market pay and audits of FLSA compliance. We also help employers develop job descriptions and evaluate FLSA classifications.