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Minimum wage

Minimum wage is defined as the lowest wage rate permitted by the law. In the United States it is enforced by the Department of Labor under the Wage & Hours Division. The minimum wage applies to all non-exempt employees and is currently set at a rate of $7.25 per compensable hour. The federal minimum wage provision is defined under the Fair Labor Standards Act (FLSA). Some states, however, have set their own minimum wage laws. In those states, companies must compensate their non-exempt employees at the higher of the two rates. 

The DOL established the Wage & Hours Division to ensure that companies and employees are properly informed about minimum wage laws. They make every effort to educate the general public on their rights under these laws and to ensure that companies are properly compensating their employees. 

There are certain exceptions to the minimum wage rate, including:

  • Workers with disabilities

  • Full-time students

  • Youth under age 20

  • Tipped employees

  • Student learners

Employers with tipped employees must pay no less than $2.13/hour in direct wages to the employee. A tipped employee’s gross earnings must be more than minimum wage when their direct wages and tips are combined. If an employee’s tips plus wages don’t add up to their eligible minimum wage, then the DOL requires the employer to pay the difference.

Other exceptions to minimum wage usually require employers to pay a percentage of the rate. For example, full-time students can earn no less than 85% of minimum wage. Once they are no longer a student, the employer is required to compensate them at the full minimum rate wage. Student learners can also be compensated at 75% of minimum wage. Once they have completed their training, employers are then required to pay them at their eligible minimum wage rate. Another exception to the minimum wage rate, is granted to youth under age 20. These workers are permitted to earn $4.25/hour their first 90 days of consecutive employment up to 20 hours per week. Once they have exceeded 90 days of employment or are working in excess of 40 hours per week (with the exception of summer employment), then the employer is required to pay them at the full minimum wage rate. 

Lastly, it is difficult to modify the federal minimum wage rate. These laws can be changed only if they are passed by Congress and signed into law by the President. Many states have opted to enforce their own minimum wage rate standards to bypass the federal government and increase wages in their own states.