Unlike federal benefits and labor relations laws, the federal minimum wage and overtime law – the Fair Labor Standards Act (FLSA) – does not preempt (or trump) state laws on the same subject. That means that employers are forced to look to both federal and all applicable state wage hour laws and comply with whichever one is most favorable to employees. That is a challenging enough task for an employer which operates in one state. But for those of you who operate regionally or nationally, the task can be Herculean!
Here are the top ten wage hour considerations for multi-state employers:
- What’s the applicable minimum wage? The current federal minimum wage is $7.25, but if a state law’s is higher, you must pay that higher amount. The highest state minimum wage is currently $9.19, Washington state.
- How about credits against the minimum wage? The FLSA allows for various credits against minimum wage obligations (such as for tips, meals provided, housing provided, etc.). But some states do not allow for some or all of those credits, or they allow for them in different amounts than the FLSA.
- What are the overtime requirements? We’re all familiar with the FLSA’s time-and-a-half requirement for hours worked over 40. But there are a handful of states that have daily overtime requirements, seventh-consecutive-day overtime requirements, or Sunday hours overtime requirements. To further complicate this issue, some of these requirements apply to only certain industries.
- Which employees are exempt from the minimum wage and overtime requirements? Nearly every employer is familiar with the common so-called “white collar” exemptions that apply to salaried employees who meet the duties requirements for executive, professional, or administrative employees under the FLSA. And some employers are aware that there are less familiar exemptions that apply to specific positions or industries. (There are more than 50!) But multi-state employers need to be aware that not every state adopts all of the FLSA exemptions. While most states either exempt employers who are covered by the FLSA from their laws, adopt the FLSA exemptions in whole, or have exemptions that mirror the FLSA’s, not all do. So the same employee may be exempt under the FLSA, but non-exempt under state law.
- When do I have to pay my employees? In the federal universe, wage hour laws are largely limited to the minimum wage and overtime requirements mentioned above. But that is definitely not the case in many states. Many states dictate requirements for a slew of wage hour-related issues that the FLSA does not touch, including the timing of the payment of the wages (certain number of days after the payperiod), the timing of the payment after termination, and the frequency of the payment of the wages (weekly, biweekly, monthly).
- How do I have to pay my employees? Another area where the FLSA is silent but where many states have requirements is how employees are paid (e.g., via check, cash, direct deposit, paycard, etc.). [Note that the FLSA’s silence on the subject didn’t stop the US DOL from placing restrictions, mentioned in its Field Operations Handbook, on payment by direct deposit.] With the growing popularity of direct deposit and paycards, more and more states are beginning to include language in their laws that allow or do not allow employers to mandate either of these forms of payment as a condition of employment (most often the latter!).
- Are employees entitled to a wage statement (i.e. pay check stub)? The FLSA is silent on the issue of wage statements, but many states require wages statements with various information (most commonly listing items like deductions from wages, hours worked, etc.) to be given with each paycheck.
- Are employees entitled to breaks? The FLSA does not require that employers provide breaks to employees, but some state laws do – some require breaks for minors, some require breaks for adults, and some require breaks for both.
- How long is the statute of limitations? The last two on the list are differences that, hopefully, you will never need to learn about -- those that apply if you have run afoul of the law. Under the FLSA, the statute of limitations is two years, or three years if the violation is deemed willful. However, some states have longer statutes of limitations for violation of their wage hour laws (as long as six years).
- What are the damages available to employees for violations? The FLSA provides for liquidated damages in an equal amount of the unpaid wages, commonly known as “double damages.” However, some states provide for “triple damages,” rather than just double.
It is no secret that wage hour lawsuits are now the most popular employment suit filed, largely because of the very low standard for class-like treatment of FLSA claims (which are opt-in) and the complexity of FLSA compliance. But the plaintiffs’ bar is increasingly adding state law claims to many of these lawsuits for a variety of reasons, which could include seeking a traditional opt-out class under the state law, the longer statute of limitations or more favorable damages available under the state law, or simply an additional violation under the state law (such as any that are described above) that doesn’t exist under the FLSA. Therefore, it remains important for multi-state employers to look beyond the FLSA when they are evaluating the compliance of their wage hour practices.