Minimum Wage Compliance

Federal minimum wage is currently set at $7.25 per hour.  However many states have minimum wages that are higher than the Federal minimum wage. If your business is subject to both sets of regulations you are required to pay the higher of the two.

Most employers think that they aren’t at risk of having minimum wage violations. The reality is that they are fairly common due to unlawful deductions taken from employees’ paychecks, unpaid hours, and tipping situations.

Let’s take a look at those issues in greater detail:

Unlawful Deductions: Say for example that your business is located in Texas where the state minimum wage is identical to the federal minimum wage ($7.25 per hour).  You require your employees to wear a uniform.  The cost of the uniform ($30) is taken out of the employees’ first weekly paycheck.  Most of your employees are paid $8.00 per hour.  Depending on how many hours each employee works in his/her first week you may have several minimum wage violations.  If employee A works 20 hours at $8.00 for a total of $160.00, but $30 is taken out for a uniform then that employee was actually paid ($160 – $30) / 20 hours = $6.50 per hour.  However if employee B works 40 hours in that same week no minimum wage violation would exist because ($320 – $30) / 40 hours = $7.25 per hour.

Unpaid Hours: Many employers get in trouble for not paying for all hours worked by employees. This occurs in a variety of situations in the workplace.  For example, if you pay an employee $8.00 per hour for 20 hours, but they actually worked 25 hours that week because their supervisor was forcing them to clock out early then you’ll have a minimum wage violation since $8.00 per hour * 20 hours = $160.00 / 25 hours = $6.40 per hour.

Tipping Situations: Under federal and most state regulations employers are allowed to pay employees who receive tips a cash wage that is less than minimum wage.  The caveat is that they have to prove that on a weekly basis their employees receive enough in tips to bring them up to at least the highest applicable minimum wage.  For employees at inexpensive restaurants that get stuck with the slowest shifts this can often result in minimum wage violations. For example, employee A is paid a cash wage of $4.50 in a state where the minimum wage is $7.25. The employee works 30 hours that week and only receives $70 in tips. ($4.50 * 30 hours) + $70 = $205 total pay.  $205 / 30 hours =  $6.83 per hour.

Minimum wage violations appear to be cents on the dollar but for large companies unlawful deductions can add up to tens of thousands of dollars in just back wages.  Not to mention the fact that liquidated damages and fines can double or triple the original amount owed. Don’t let a simple thing like uniforms create a hundred thousand dollar liability.

The Labor Brain Inc. is not a law firm and its employees do not practice law or provide legal services.  The information provided on our website,  in email correspondence with representatives of The Labor Brain, and at outreach events is for informational and educational purposes only.  The information provided is not a substitute for the advice of an attorney.