When is the Minimum Wage Not the Minimum Wage?

We all know that the minimum wage is the lowest hourly rate that employers may legally pay to workers. Or is it?

It turns out that there are some exceptions to minimum wage laws. The Fair Labor Standards Act contains some exemptions that apply to certain types of businesses, specific types of work, and certain individuals.

Here's the run-down on sub-minimum wages:

• Young workers: employees under the age of 20 can be paid an hourly rate of $4.25 during the first 90 consecutive calendar days of employment, as long as their work does not displace other workers. After the 90-day period or attainment of age 20 (whichever is first), the employee must receive the "standard" minimum wage of $7.25.

• Student learners: a student learner is a high school student at least 16 years old who is enrolled in vocational education. Employers who hire student learners can obtain a certificate from the Department of Labor that allows the student to be paid 75% of the minimum wage as long as the student is enrolled in the vocational education program.

• Full time students: full-time students employed in retail or service stores, agriculture or colleges and universities can be paid 85% of the minimum wage, provided the employer obtains a certificate from the Department of Labor. The certificate limits the student's employment to 8 hours per day and a maximum of 20 hours per week while school is in session. Students are permitted to work 40 hours per week when school is not in session. Upon graduation or departure from school, the "standard" minimum wage rate applies.

• Tipped employees: employers can pay tipped employees $2.13 per hour in direct wages, provided that (a) this hourly rate plus tips received are at least equal to the federal minimum wage, (b) the employee retains all tips and (c) the employee customarily and regularly receives more than $30 per month in tips. If the combination of tips and direct wages of $2.13 per hour are less than the federal minimum wage, the employer must make up the difference.

• Workers who have disabilities for the work being performed: employers who receive a certificate from the Department of Labor can pay individuals less than the minimum wage - and less than the prevailing wage rate - for workers who have disabilities for the work being performed. A worker who has disabilities for the job being performed is one whose earning or productive capacity is impaired by a physical or mental disability, including those relating to age or injury. This exemption doesn't apply unless the disability actually impairs the worker's earning or productive capacity for the work being performed. The fact that a worker may have a disability is not in and of itself sufficient to warrant the payment of a special minimum wage.

• Employees in specific industries and occupations: individuals employed by certain seasonal amusement or recreational establishments, seamen employed on foreign vessels, employees engaged in fishing operations, farm workers employed on small farms, employees engaged in newspaper delivery, and casual babysitters and individuals employed as companions to the elderly or infirm may be exempt from minimum wage laws.

The current federal minimum wage is $7.25 per hour. But that may not be the lowest hourly rate employers can legally pay employees. If one of these exemptions applies, employers may be permitted to pay an hourly rate less than $7.25. On the other hand, if you live in one of the 18 states (or the DIstrict of Columbia) where the state minimum wage is higher than the federal minimum wage, the lowest hourly rate legally allowed may be greater than $7.25

Be sure to comply with all federal and state minimum wage laws, and check with your legal counsel with any questions.

Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. Since 1999, she's been working with businesses and government agencies providing expert analysis. Stephanie's articles on examining compensation systems for internal equity have appeared in professional journals and she has appeared on NPR to discuss the gender wage gap. Stephanie is the founder of Thomas Econometrics and is the host of The Proactive Employer Podcast. Follow her on Twitter at ProactiveStats. 

 

Comments

[E. James (Jim) Brennan]

Thanks for a very useful summary, Stephanie. Here is a table showing http://en.wikipedia.org/wiki/List_of_U.S.A._minimum_wages#cite_note-minwage-7 all the US minimum wages. Location can make a difference, too, since Guam (Guahan) is the only US Territory that has a minimum wage as high as the US Federal rate; the others have specific exceptions for lower rates.

[Jacque Vilet]

Stephanie ---- great article. I haven't kept up with comp/benefit laws in the U.S. in 15 or so years since I have been working international. But I've got a question. I work with foreign grad students --- like getting their masters degree. I would like to know if it is legal not to pay a foreign student anything for an internship (long hours CPA firm during tax season) when the person is actually completing tax returns and filing them? They get university credit for the internship, but it seems a little weird to me that they don't get paid something. What is the law on this?
Thanks.

[Stephanie R. Thomas]

Hi Jacque - unfortunately I don't know the answer to your question. I'm not a lawyer and can't say whether the situation you described is or is not legal. I'll check with some of my employment attorney contacts and see if I can get some insight from them.

[E. James (Jim) Brennan]

Jacque: It depends on the law where they are. There are special exceptions to the U.S. minimum wage for student employees getting academic credit for their work.

Whether they must be paid is different. Here is a recent NYT article on it: http://mediadecoder.blogs.nytimes.com/2012/02/01/former-intern-sues-hearst-over-unpaid-work-and-hopes-to-create-a-class-action/. Your case would seem to fail to satisfy the U.S. law (http://www.dol.gov/whd/regs/compliance/whdfs71.pdf), particularly because the student is displacing another worker and doing work of value to the employer. See a lawyer to pursue back pay entitlements.

[Jacque Vilet]

OK thanks Jim. The DOL has answered my question.