Wages and Overtime

The paychecks we are promised for our work are, for most of us, a major reason for working at all. Compensation causes us to pick between jobs, to choose between working and retiring, and to select from among different places to live. Federal and state governments both recognize the importance of wages, and have enacted many laws designed to protect your interest in receiving fair pay for your work. An experienced employment law attorney can help you take advantage of the protections offered by those laws.

Minimum Wage Requirements

Federal law requires that most employees receive a wage of at least $5.15 per hour. Some states have set the minimum at a higher level. If a state has set a higher minimum, that higher minimum applies. There are some exceptions to the minimum wage. Employers should remember that the exceptions are to be interpreted very narrowly, and it is up to the employer to prove that a particular worker is exempt. If there is any doubt, the U.S. Department of Labor assumes that a worker is covered by the minimum wage laws.

Federal law, and some state laws, allows employers to pay a lower wage, sometimes called a training wage, to employees under twenty years of age. Federal law sets the lower minimum at $4.25 per hour. This lower wage may be paid only for the first 90 days of employment, and an employer may not do anything that displaces a worker who is paid more in order to be able to pay the lower wage.

Federal law sets the minimum wage for employees who earn regular tips at $2.13 per hour. In order for this exemption to apply, the employee must regularly receive more than $30 per month in tips, and be allowed to keep all of his or her tips. The tips plus wages combined must add up to at least the $5.15 per hour standard minimum wage. If tips plus wages do not equal the minimum wage, the employer must make up the difference.

Federal law, and many state laws, defines certain types of employees, such as administrative, professional, executive, and outside sales employees as exempt from both minimum wage and overtime requirements. Both federal and state laws provide for additional exemptions from the minimum wage for specific employees, such as some full-time college students, workers on some farms, workers employed in fishing enterprises, and other types of employees. It is important to act carefully when deciding whether you or one of your employees falls into an exempt category.

Overtime

Federal law requires that employees who are not “exempt” receive overtime pay for any time they work over forty hours in any workweek. The rate of overtime pay is one and one-half times the employee’s regular rate of pay, and must be paid in cash, not in goods or time off. A “workweek” is defined as one period of 168 hours, or seven consecutive twenty-four hour periods. The workweek may start at any time, or on any day, as long as the starting day and time are applied consistently. Employees who are eligible for overtime pay may not waive their right to receive overtime.

Many of the questions about overtime concern which employees are exempt from the overtime requirements. Effective August 23, 2004, U.S. Department of Labor regulations state that all employees who earn less than $455 per week, or $23,660 per year, are automatically entitled to receive overtime pay. Employees who earn more than that amount are exempt from overtime requirements if they are compensated on a salary, and not on an hourly basis, and if their job falls into one of the following categories:

• Executive, in which an employee’s primary duties involve office or non-manual work directly related to the management of the employer’s operations, and which require the employee to exercise discretion and independent judgment.
• Learned professional, in which an employee’s primary duties involve the performance of work that requires advanced knowledge in a field of science or learning. Advanced knowledge is a kind usually acquired by a prolonged course of specialized instruction, and is not acquired on the job.
• Creative professional, in which an employee’s primary duties involve invention, imagination, originality, or talent in a field of creative or artistic endeavor.

In addition, outside-sales employees and skilled computer employees (such as software engineers and systems analysts) are exempt from overtime requirements. An outside-sales employee is one whose primary duty is making sales and who usually works away from the employer’s premises. A computer employee is one who is employed on either a salary or fee basis at no less than $455 per week or who is paid an hourly wage of no less than $27.63 per hour. A computer employee has primary duties that involve the application (including consulting), creation, development, or modification of computer systems or programs, or machine operating systems.

Note that some federal courts have held that an employee loses his or her exempt status if his or her salary is docked for absenteeism or substandard performance.

Conclusion

Wage and overtime laws are something all employers and employees should be aware of. These laws, and the regulations that apply these laws, can be very difficult to understand. A knowledgeable employment law attorney can give you all the information you need about these laws and regulations.