Set forth below are resources discussing the most frequent type of wage and hour violations that are occurring today. Significantly, many of these violations occur in unionized workplaces and can be remedied in court. This resource section is designed to help you recognize when these violations are occurring at your workplace. Please do not hesitate to contact us should you have any questions.
Minimum Wage Issues
The minimum wage in the United States is currently only $7.25 per hour. An employee’s pay must average this amount for each hour worked regardless of whether the employee is paid on an hourly basis, a salaried basis, a task basis, or any other type of payment scheme. In some states, such as California, an employee must be paid the state minimum wage of
Many states and cities have minimum wage rates that are higher than the national law. If an employee works in a city or a state that has a minimum wage that is higher than $7.25 per hour, the employee is entitled to receive the higher wage. All of the state minimum wages are listed on the U.S. Department of Labor website.
Provided that they meet certain strict criteria, employers may take credit for the reasonable value of meals and lodging. In addition, as explained below, in certain industries the employer may apply a tip credit for individuals who work in jobs that normally receive tips.
Commonly Used but Prohibited Payment Practices
Fixed sum for varying amounts of overtime. Some employers pay a fixed sum that they attempt to use as overtime compensation. A lump sum payment for work performed during overtime hours without regard to the number of hours worked does not qualify as overtime compensation. This is true even if the lump sum exceeds the amount to which the employee would be paid on a per hour basis. To properly compute the employee’s overtime pay, the lump sum payment must be added to the employee’s other overtime compensation and then the employee’s regular rate of pay determined. The employee is entitled to overtime pay equal to 1.5 times this regular rate of pay.
Salary includes regularly scheduled overtime hours: Another similar violation occurs where an employer asserts that a portion of an employee’s salary constitutes overtime pay. This is not allowed except under very specific circumstances called “Belo contracts,” which can only be used if:
- the arrangement is pursuant to a specific agreement between the employee and the employer, or a collective bargaining agreement,
- the employee’s duties necessitate irregular hours of work,
- the fluctuation in the employee’s hours is not entirely in the overtime range, and
- the contract guarantees a weekly overtime payment not to exceed 60 hours per week and the employee receives that payment regardless of the number of hours actually worked.
Overtime pay must be in addition to and cannot be a part of an employee’s salary.
Bonus as part of overtime pay: Some employers pay bonuses to employees and tell them that the bonus includes the employee’s overtime pay for working on a particular project or job. Unless the “bonus” is tied to each hour worked, it does not properly constitute overtime compensation.
Tipped Employees
Congress has enacted a special exception to the rules for computing the minimum wage for tipped employees. Under federal law (many states have laws much more favorable to employees) An employer is permitted to pay tipped employees a “cash wage” of only one-half the 1996 minimum wage ($4.25/hour). This means employers can pay tipped employees a cash wage of only $2.13 an hour so long as tips make up the rest of the minimum wage.
The tip credit the employer receives may not exceed the value of the tips the employee has actually received. If this amount fails to meet the minimum wage, the employer must make up the difference.
Employers may apply the tip credit only if:
- The employee is working in a job in which employees customarily and regularly receives $30 per month in tips;
- The tipped employee has been informed by the employer about the tip credit law and that the employee must be allowed to retain all tips the employee receives, with the exception that tip pooling arrangements with other employees are allowed provided that certain notice requirements are met; and
- Employers cannot require employees to share tips with their employer.
If an employer violates any of these three elements, a tip credit is not allowed.
Moreover, even if the employer pays tipped employees the minimum wage, the employer may not retain any of the tips of the employees other than to administer a valid tip pooling arrangement
Examples of employer abuse concerning the tip credit are employers who compel employees to kickback tips or who do not provide employees with all the tips received, employers who make tipped employees perform non-tip credit work, or who miscalculate the rate at which tipped employees receive overtime pay. For examples, some restaurants mandate a 15% or higher tip charge on large parties at a restaurant. This is a tip that is the employees to keep if the employer is using the tip credit provisions of the Act.
The general rule is that an employer may permit tipped employees to perform some non-tipped credit work, but only if the work is related to the tipped work and so long as it does not take longer than 20% of the employees work time. The Trump Department of Labor is considering issuing regulations that may attempt to make the 20% more favorable to employers.
Furthermore, the tip credit is frequently misapplied by employers when tipped employees work in excess of 40 hours a week. The tip credit cannot be used other than for the difference between $2.13 per hour and $7.25 pre hour. A tipped employee is entitled to receive 1.5 times the minimum wage as overtime pay minus the tip credit for straight time. Thus, the minimum rate at which a tipped employee can receive overtime is $7.25 x 1.5 = $10.88 minus the tip credit for straight time of $5.12 = $2.13 + $3.63= $5.76 + all tips.
State Tip Laws: Many states have more favorable laws with respect to the tip credit than federal law. Indeed 7 states (Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington) do not allow the tip credit at all. To see the different state laws on the amount of the tip credit see https://www.dol.gov/agencies/whd/state/minimum-wage/tipped For a more detailed discussion of the nuances of these laws See G. McGillivary, State Wage and Hour Laws, (3rd Ed. 2020) published by Bloomberg Law.
Compensatory Time – Public Sector
Under Section 7(o) of the FLSA, public employers may, with the agreement of the employee or their representative, pay comp time instead of cash for overtime work. However, there are specific rules that must be followed in awarding comp time, granting requests to use comp time and cashing it out.
To pay comp time, the employer must have an agreement with the employee or their representative to do so before the employee performs overtime work. There are also limits on the number of comp hours that can be accrued: 240 hours for regular employees and 480 hours for public safety employees.
If an employee requests use of comp time, the request must be granted unless it unduly disrupts the operations of the department. The Sixth Circuit held in Beck v. City of Cleveland, 390 F.3d 912 (6th Cir. 2004), that it does not disrupt the operations of a department to call in another employee to work overtime. There is also a district court decision — Debraska v. City of Milwaukee — that reached the same holding. Thus, as long as there is an employee willing to work to replace the employee using comp time, the comp time request must be granted within a reasonable date of the request.
Finally, when an employee terminates his or her employment, the employees’ comp time must be cashed out at the average rate of pay the employee received in the three years before retirement or his final rate of pay, whichever is higher. 29 CFR § 553.27.
Comp time cases usually involve two issues:
Requests are improperly denied
Many public employers routinely deny requests to use comp time on the basis that they will have to call an employee back to work overtime to replace the employee who wants to use comp time. They do so under the mistaken belief that calling another employee to work overtime constitutes an “undue disruption” of the agency’s work. As the Beck decision makes clear, however, this is legally invalid.
and/or
Comp time is not cashed out properly or is converted to some other form of leave
Public employers often fail to cash out the employees’ comp time when employees retire, or they cash it out at the wrong rate. All shift differentials, longevity pay, etc. must be factored into the rate at which comp time is cashed out. In some jurisdictions, comp time is converted to some other form of leave if it is not used within a certain period of time. For example, in one case we handled it was converted to sick leave after one year. Then, any unused sick leave was cashed out at 50% of its value when an employee left employment. This violates the FLSA.
