What Is Minimum Wage?

Written by Staff Writer

Employees are subject to both state and federal minimum wage laws. If state and federal law differ, the higher wage prevails. Read on to find out the national minimum wage and information on state-level wage laws.

Federal Minimum Wage

Since 2009, the federal minimum wage has been set at $7.25, though this rate may change in the future. Increases occur when Congress passes a bill and the President signs it into law, not automatically. Some exemptions exist that are subject to specific conditions and regulations covered in the Fair Labor Standards Act (FLSA).

Who the Federal Law Covers

Federal minimum wage applies to eligible workers who are covered by the FLSA. The act applies to employees of enterprises as well as individual employees.

Enterprise coverage applies to certain businesses or organizations with at least two employees and an annual dollar volume of $500,000 or more in sales or business. It also applies to hospitals, businesses that provide medical or nursing care to residents, schools, preschools and government agencies.

Individual coverage is available to non-enterprise workers whose work regularly involves interstate commerce. This can include:

• Producing goods that will be sent out of state
• Regularly making phone calls to people in other states
• Handling records of interstate transactions
• Traveling to other states for work
• Doing janitorial work in buildings where goods are produced for out-of-state shipment

The law also covers housekeepers, full-time babysitters, cooks and other domestic service workers.

Exemptions

Certain employees are exempt from minimum wage laws. Employers should be familiar with these exemptions in order to maintain compliance with applicable labor laws. Most exemptions depend on weekly wages and are judged on a case-by-case basis, but some standard exemptions apply for those who work for tips, farm and seasonal employees and students.

Federal law demands that workers who regularly receive more than $30 per month in tips must be paid at least $2.13 an hour. If the amount of tips earned exceeds or equals $7.25 an hour, the employee keeps the tips as well as the $2.13. If the amount of tips that day does not equal $7.25 an hour, the employer must make up the difference.

In specific and case-by-case circumstances, some employees on small farms and seasonal and recreational employees are not entitled to minimum wage.

During the first 90 calendar days of work for employees under 20, the minimum wage is $4.25 per hour. After 90 days, the regular $7.25 is required. Full-time students employed in retail or service stores, colleges, universities or agriculture can be paid no less than 85% of minimum wage if the employer obtains a certificate from the Department of Labor. Additionally, the student may not work over eight hours a day and no more than 20 hours a week during the school year and 40 hours a week when school is not in session.

Employers must follow child labor laws, and must pay a student minimum wage upon graduation. For students at least 16 years old engaged in a vocational education, an employer may gain a certificate from the Department of Labor to pay the student no less than 75% of minimum wage while the student remains in the program. For more information regarding certificates, call (312) 596-7195.

A sub-minimum wage may apply for workers with disabilities. The Secretary of Labor has the right to issue a certificate on a case-by-case basis. For more information, you can call (312) 353-3809.

Visit the U.S. Department of Labor's Minimum Wage site for answers to many frequently asked questions about federal minimum wage requirements.

State Minimum Wage

Some states offer a higher minimum wage than the national standard, while others are the same, lower or have no state law regarding minimum wage. To ensure a fair wage, workers who are subject to both state and federal minimum wage laws are entitled to whichever rate is higher.

The following states have a minimum wage that is greater than the federal requirement:

The following states issue the same minimum wage as federal law:

The following states have a lower minimum wage than federal law (federal rate applies):

The following states have no minimum wage (federal rate applies):

The exact amount required in each state is subject to change. Visit the DOL Wage and Hour Division website for current minimum wage information for your location.

Pay Raises

Although many employees feel entitled to a pay raise after working in a position for a certain amount of time, no federal or legal support for this practice exists. No U.S. law, including the Fair Labor Standards Act (FLSA), dictates pay raises, which remain as agreements between employers and employees.