SMALL BUSINESS HANDBOOK: LAWS, REGULATIONS AND TECHNICAL ASSISTANCE SERVICES

1. MINIMUM WAGE AND OVERTIME PAY

Who is Covered

The Act applies to enterprises that have employees who are engaged in interstate commerce, producing goods for interstate commerce, or handling, selling or working on goods or materials that have been moved in or produced for interstate commerce. For most firms, an annual dollar volume of business test of not less than $500,000 applies. The following are covered by the Act regardless of their dollar volume of business: hospitals, institutions primarily engaged in the care of the sick, aged, mentally ill or disabled who reside on the premises; schools for children who are mentally or physically disabled or gifted; preschools, elementary and secondary schools and institutions of higher education; and federal, state and local government agencies.

Employees of firms that do not meet the $500,000 annual dollar volume test may be individually covered in any workweek in which they are individually engaged in interstate commerce, the production of goods for interstate commerce, or an activity which is closely related and directly essential to the production of such goods. Domestic service workers, such as day workers, housekeepers, chauffeurs, cooks or full-time babysitters, are also covered if they receive at least $50 in cash wages in a calendar quarter from their employers or work a total of more than 8 hours a week for one or more employers.

An enterprise that was covered by the Act on March 31, 1990, and that ceased to be covered because of the increase in the annual dollar volume test to $500,000, as required under the 1989 amendments to the Act, must continue to pay its employees not less than $3.35 an hour (the statutory minimum wage prior to 4/1/90) and continues to be subject to the overtime pay, child labor and record-keeping requirements of the Act.

Some employees are excluded from the Act's minimum wage and/or overtime pay provisions under specific exemptions provided in the law. Because these exemptions are generally narrowly defined, employers should carefully check the exact terms and conditions for each by contacting the Wage and Hour Division of the Employment Standards Administration (ESA) at the offices referenced below. The following are examples of employees exempt from both the minimum wage and overtime pay requirements:

Executive, administrative and professional employees (including teachers and academic administrative personnel in elementary and secondary schools and also including certain skilled computer professionals as provided in P.L. 101-583, November 15, 1990) and outside sales persons
Employees of seasonal amusement or recreational establishments
Employees of certain small newspapers and switchboard operators of small telephone companies
Seamen employed on foreign vessels
Employees engaged in fishing operations
Farm workers employed on small farms (i.e., those that used no more than 500 "man-days" of farm labor in any calendar quarter of the preceding calendar year)
Casual babysitters and persons employed as companions to the elderly or infirm

The following are examples of employees exempt from the Act's overtime pay requirements only:
Certain commissioned employees of retail or service establishments Auto, truck, trailer, farm implement, boat or aircraft salesworkers, or parts-clerks and mechanics servicing autos, trucks or farm implements, and who are employed by non-manufacturing establishments primarily engaged in selling these items to ultimate purchasers

Railroad and air carrier employees, taxi drivers, certain employees of motor carriers, seamen on American vessels and local delivery employees paid on approved trip rate plans
Announcers, news editors and chief engineers of certain non-metropolitan broadcasting stations
Domestic service workers who reside in their employer's residence
Employees of motion picture theaters
Farmworkers
Certain employees may be partially exempted from the Act's overtime pay requirements. These include:
Employees engaged in certain operations on agricultural commodities and employees of certain bulk petroleum distributors
Employees of hospitals and residential care establishments which have agreements with the employees to work a 14-day work period in lieu of a 7-day workweek if the employees are paid overtime premium pay within the requirements of the Act for all hours worked over 8 in a day or 80 in the 14-day work period, whichever is the greater number of overtime hours
Employees who lack a high school diploma or who have not completed the eighth grade may be required by their employer to spend up to 10 hours in a workweek in remedial reading or training in other basic skills that is not job-specific, as long as they are paid their normal wages for the hours spent in training. Such employees need not be paid overtime premium pay for their training hours.

Basic Provisions/Requirements

Employers may pay a training wage, under certain conditions, of at least 85 percent of the minimum wage (but not less than $3.35 an hour) for up to 90 days to employees under age 20, except for migrant or seasonal agricultural workers and H-2A nonimmigrant agricultural workers performing work of a temporary or seasonal nature. An employee who has been paid at the training wage for 90 days can be employed for 90 additional days at the training wage by a different employer if that employer provides on-the-job training in accordance with rules of the Department of Labor. Employers may not displace employees (or reduce their wages or benefits) in order to hire employees at the training wage. These training wage provisions expire on March 31, 1993.

The Act also permits the employment of the following individuals at wage rates below the statutory minimum wage under certificates issued by the Department:

Student learners

While not placing a limit on the total hours which may be worked, the Act requires that covered employees, unless otherwise exempt, be paid not less than one and one-half times their regular rates of pay for all hours worked in excess of 40 in a workweek. Employers are required to keep records on wages, hours and other items as set out in the Department of Labor's regulations. Most of this information is of the type generally maintained by employers in ordinary business practice.

Performance of certain types of work in an employee's home is prohibited under the Act unless the employer has obtained prior certification from the Department of Labor. Restrictions apply in the manufacture of knitted outerwear, gloves and mittens, buttons and buckles, handkerchiefs, embroideries and jewelry (where safety and health hazards are not involved). Employers wishing to employ homeworkers in these industries are required to, among other things, provide written assurances to the Department that they will comply with the Act's monetary and other requirements. The manufacture of women's apparel (and jewelry under hazardous conditions) is generally prohibited, except under special certificates that allow homework in these industries when the homeworker is unable to adjust to factory work because of age or physical or mental disability, or is caring for an invalid in the home.

Special provisions apply to state and local government employment. It is a violation of the Act to fire or in any other manner discriminate against an employee for filing a complaint or for participating in a legal proceeding under the Act. The Act also prohibits the shipment of goods in interstate commerce which were produced in violation of the minimum wage, overtime pay, child labor, or special minimum wage provisions.

Assistance Available

Penalties

Relation to State, Local and Other Federal Laws