The Minimum Wage: An Overview
Minimum wage laws establish a base level of pay that employers are required to pay certain covered employees. The current federal minimum wage is $6.55 per hour. The laws consist primarily of federal and state statutes. When an employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher of the two minimum wages. Many states, including California, have a higher minimum wage which must be followed by local governmental agencies.
The national minimum wage was created by Congress under the Fair Labor Standards Act (FLSA) in 1938. Congress enacted this legislation under its Constitutional grant of authority to regulate interstate commerce. 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.
FLSA's requirements only apply to “employees.” To determine whether an individual is an employee under the FLSA, courts usually focus on the economic reality of the relationship. The important issue is whether the individual is “economically dependent” on the business to which he 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, the degree of control the alleged employer has over the way in which the work is performed.
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.
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 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 of up to $11,000 for willful violations of the statute. 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, mandatory liquidated damages equal to the amount of the unpaid compensation, reinstatement, and attorneys' fees.
Menu of Sources
29 U.S.C. §§ 201 et seq.: Fair Labor Standards Act (FLSA)
CRS Annotated Constitution
Regulations promulgated under FLSA (29 C.F.R. parts 500-899)
Federal Judicial Decisions
Link to LII: recent FLSA and minimum wage decisions
State Constitutions and Statutes
- California Minimum Wage
- California Constitution Article XIV, § 1.
- California Labor Code §§ 50 et seq.
- New York Minimum Wage
- New York Labor Law Article 19 §§ 650 et seq.
Link to LII: state minimum wage decisions.
Key Internet Sources
- U.S. Department of Labor
- Employment Standards Administration Wage and Hour Division
- New York State Department of Labor
- Wage and Hour Laws (Nolo)