By law, employees in the United States must be paid a base minimum for their work performed. However, this protection varies widely depending on the state in which the employees are working.
The federal Fair Labor Standards Act (FLSA) provides the baseline protection for employees. Regardless of state, employers generally must pay their employees at least $7.25 per hour.
While a state cannot permit employees to be paid less than the FLSA guaranteed minimum, states have the power to require employers to pay a higher minimum wage.
The most direct way that this can be done is if a state sets its hourly minimum wage above $7.25. For example, the current minimum hourly wage in California is $11.00 for employers with 26 employees or more and $10.50 for employers with 25 employees or less. (Cities can also set higher minimum wages; for example, the current minimum wage for employees in San Francisco is $15.00 per hour.)
States can also differ from the federal government in how they interpret the concept of a guaranteed minimum wage per hour.
Under the FLSA, “[e]very employer shall pay to each of his employees who in any workweek is engaged in commerce . . . not less than . . . $7.25 an hour.” 29 U.S.C. § 206(a). One can’t be faulted for thinking this means that employees are entitled to at least $7.25 per hour for each and every hour worked. Indeed, it is logical to think that the law was intended to guarantee a base level of compensation for every hour worked. However, logic and the law are not always aligned.
Shortly after the FLSA was first passed into law, the U.S. Department of Labor (“DOL”), the agency that administers the law, issued a statement that it would analyze the minimum wage provision based on workweek earnings. So long as average hourly wage—calculated as weekly earnings divided by hours worked—exceeded the minimum wage, the DOL was satisfied. The DOL acknowledged that there were other ways to read the statute and suggested it could revisit its position after courts considered the issue. However, federal courts adopted the DOL’s position, and there is now near-unanimous consensus that the federal minimum wage is met where employees’ average hourly wage exceeds the minimum baseline.
Of course, the averaging methodology doesn’t adversely impact an employee who is paid a set hourly wage for all workweek hours; his average hourly wage and actual hourly wage are the same for each hour worked. However, employees whose earnings fluctuate are deeply impacted.
Consider an employee who is paid based on his “productive” hours. As an example, a mechanic might be guaranteed $20.00/hour for all time spent servicing vehicles, but no compensation for “nonproductive” time. In this scenario, the mechanic’s “nonproductive” time includes all non-repair work, such as cleaning, ordering equipment, attending staff meetings, answering phones, taking part in training, and waiting for the next repair job. If the mechanic’s 40-hour workweek was split, 50% on “productive” work and 50% on “nonproductive” work, he would be paid $400 for the week. Under the FLSA’s averaging methodology, the fact that the mechanic made zero money for half of his hours worked is irrelevant; all that matters is that the employee made an average of $10.00 per hour, satisfying the federal minimum wage.
California takes a different view. California wage law requires that employees be paid the minimum wage for “all hours worked.” Recognizing the difference between the state law and the FLSA, as well as the fact that California wage law is more protective of employees, California courts have ruled that under state law, employees must be paid the minimum wage for each and every hour worked. The courts ruled that using an averaging methodology would permit employers to unlawfully take credit from employees’ earned compensation to cover unpaid (or underpaid) hours. In 2016, California’s state legislature ratified the courts’ position and recognized that even “nonproductive” hours must be paid “at an hourly rate that is no less than the applicable minimum wage.” Cal. Lab. Cod 226.2(a)(4).
Let’s revisit our mechanic who is paid $20.00 for each hour of repair work. In the above scenario, he worked 40 hours during the week, half of which were “productive” hours doing repairs and half of which were non-repair work. As previously discussed, under the FLSA, the mechanic’s employer need only pay him $400 for the workweek. However, in California, the 20 hours of “nonproductive” work would need to be paid at the minimum wage. At a minimum wage of $11.00 per hour, the Californian mechanic would be entitled to $620 for the workweek—more than 50% greater than what is required under the FLSA.
The takeaway: States have a significant role to play in ensuring employees are adequately compensated, and many have firmly taken on the mantle. Employers should check local and state wage laws to make sure they are in compliance. Employees should do the same and make sure they are not being short-changed!
If you believe you have been paid less than the minimum wage, you should consult with a lawyer to determine whether to bring a wage theft lawsuit. Sanford Heisler Sharp, LLP has experienced employment lawyers in New York, Washington, DC, San Francisco, San Diego, Tennessee, and Baltimore.