minimum wage

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Minimum wage laws establish a base level of pay that employers are required to pay certain covered employees. The current federal minimum wage is $7.25 per hour. In addition to a federal minimum wage, some states also have their own minimum wages, codified either in a state statute or in the state's constitution. States are broken up into 4 classifications for minimum wage:

  • States with minimum wages higher than the federal government's 
  • States with statutes which explicitly match the federal minimum wage
  • States without any sort of minimum wage statute (which results in that state's minimum wage automatically matching the minimum wage of the federal government)
  • States which explicitly set out a minimum wage which is lower than the federal government's.
    • This lowered minimum wage will only apply to certain jobs within the state, while the remaining majority of jobs would match the federal minimum wage

Municipalities, cities, or counties may also have local minimum wage laws if the laws are compliant with federal and state laws. When an employee is subject to valid local, state, and federal minimum wage laws, the employee is entitled to the highest of the minimum wages. 

Fair Labor Standards Act

Overview

The national minimum wage was created by Congress under the Fair Labor Standards Act (FLSA) in 1938. Congress enacted this legislation under its authority in Article I, Section 8 of the U.S. Constitution: “The Congress shall have power to . . . regulate commerce . . . among the several states.” FLSA was a comprehensive federal scheme which provided for minimum wages, overtime pay, record keeping requirements, and child labor regulations. The purpose of the minimum wage was to stabilize the post-depression economy and protect the workers in the labor force. The minimum wage was designed to create a minimum standard of living to protect the health and well-being of employees. Others have argued that the primary purpose was to aid the lowest paid of the nation's working population, those who lacked sufficient bargaining power to secure for themselves a minimum subsistence wage. FLSA specifically provided for a minimum wage for full time and part time, public and private sector workers. Specifically, workers who are “engaged in” or “in the production of goods for” interstate (commerce between the states) and foreign commerce.

Employees

FLSA's requirements only apply to “employees” as opposed to independent contractors. To determine whether an individual is an employee under the FLSA, courts usually focus case-by-case on the economic reality of the relationship. The important issue is whether the individual, under the totality of the circumstances, is “economically dependent” on the business to which the employee renders service. Courts also look at a variety of factors that are similar to those used in the common law tort context to differentiate employees from independent contractors. For example, courts will look at the degree of control the alleged employer has over the way in which the work is performed - typically an employer will have more of a degree of control over an employee, compared to the degree of control that an employer would have over an independent contractor. 

Exemptions

Congress exempted certain employees from the minimum wage provisions, for example: executives, administrators, professionals, and outside salespersons. It is likely that Congress believed that these employees had a higher level of bargaining power and were not as vulnerable to overreaching by their employers. Other exceptions apply under specific circumstances to workers with disabilities or full-time students.

Enforcement

FLSA authorizes the Secretary of Labor to use several different methods to evaluate an employer's conduct and enforce the minimum wage requirement. Congress created the Wage and Hour Division in the Labor Department to allow the Wage-Hour Administrator and the Secretary to investigate and detect violations. The Wage and Hour Division can compel the attendance of witnesses at hearings. It may also require an employer to make records available to the Wage-Hour Administrator. Additionally, the Secretary can sue to restrain violations and to some extent recover unpaid benefits on behalf of employees.

Damages and Remedies

29 U.S. Code § 216(b) and 29 U.S. Code § 216(c) governs civil damages and civil remedies. Damages for employees for violations can be significant. The FLSA affords a private right of action for employees to recover unpaid minimum wages. In fact, an employee may bring a claim on the employee's own behalf and on behalf of any “similarly situated” employees. The FLSA has both civil and criminal components. FLSA provides for criminal penalties and fines. Furthermore, an individual can be held personally liable for civil damages, if she effectively controls an employer and/or serve as an alter ego of it. The civil remedies can include all unpaid compensation, liquidated damages, reinstatement, and attorneys' fees. 

Federal Material

State Material

State Constitutions and Statutes

Key Internet Sources

[Last updated in July of 2023 by the Wex Definitions Team]