Minimum wage set to increase.

Minimum wage set to increase.

You have seen this posted for two years, since Congress began implementing incremental minimum wage increases two years ago.  So don’t forget, as of July 24, 2009, the federal minimum wage will increase from $6.55 per hour to $7.25 per hour.  You can keep the same poster until something else changes, though.

Minimum wage seems easy enough to understand, but in fact there are many ways in which an employer can make mistakes, whether on purpose or inadvertently.  One thing to remember is that states are permitted to impose a minimum wage different from the federal wage.  If it’s higher, the state minimum wage controls.  Maryland automatically follows the federal standard, so the amount of the minimum wage is equal.

But since not all jobs are subject to the federal minimum wage, Maryland’s minimum can be important.  A job not subject to minimum wage under federal law may be subject to the Maryland law.  (Federal law applies to jobs affecting interstate commerce; that cuts a wide swath across the economy, but there are occasional exceptions.)  In addition, Baltimore City has a minimum wage equal to the federal and state minimum per hour, and affects employers of at least two people.  So, in other words, only you self-employed people are completely exempt, and can work for less than minimum wage (but you already knew that).  But for certain service contracts with the City, employers must pay at least $10.19 per hour, as of July 1, 2009.  A still-higher prevailing wage is payable on city construction contracts.

Under federal law, exceptions to the minimum wage exist for certain categories of workers.  For example, workers with disabilities and certain students may be paid less than the minimum wage, for policy reasons supporting employment of the disabled, whose employment level is quite low, and to encourage hybrid learning/working situation.  In addition, workers under the age of 20 in their first 90 days of employment may be paid a minimum of $4.25 per hour, to encourage successful first forays into the job market.

Perhaps the most widespread area of confusion and abuse relates to tipped employees.  Under federal law, a tipped employee must earn a wage of at least $2.13 an hour if that amount, combined with the tips, equal at least the minimum wage.  This exception also requires that the employee keeps all of the tips he receives, and that he or she gets at least $30 in tips per month.  In Maryland, the minimum direct wage, paid by the employer, has to be 50% of the minimum wage.

I have occasionally seen employers try to game this exception by not permitting the employees to keep their tips, or cutting the minimum wage to nothing when tips are high.  Splitting tips with others in a restaurant, for example, is a tricky area.  It does not violate federal law, if it is the regular practice of the establishment, but it does require the payment of the full minimum wage to the servers.

State law may be more protective.  Starbucks’ big loss in California of more than $105 million on this issue was overturned on appeal last month.  Read more here.

Critical to that decision were two factors: one, that the tips were in pooled plastic tubs, and two, that shift supervisors were not really management employees, and often prepared and served coffee just like the lower level baristas.  (Also, this case arose under California law, not the federal Fair Labor Standards Act.)

I’ll talk about overtime issues in another post.  That area is even more complex and riddled with exceptions than the minimum wage law.

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