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Wage and Hour Compliance Must Take into Account State Wage Laws Often Different from Federal FLSA

By Paul J. Siegel
  • January 14, 2005

For quite a while, there has been a heated national debate about revision of the "white collar" exemptions contained in the Fair Labor Standards Act, including the minimum salary for exempt status and the extent to which a worker's "duties" must be supervisory, administrative, professional or outside sales in nature. The intensity of the disagreement about the overtime pay exemptions is reflected in the great number of comments received by the United States Department of Labor when it published proposed revisions to the "white collar" overtime pay regulations. When the final version of the regulations finally went into effect, the debate continued in the media and in Congress.

State Wage Laws Often Differ from the FLSA

While the national debate focused attention upon the new regulations under the federal Fair Labor Standards Act, employers also must focus upon state laws governing compensation of employees, including statutes mandating overtime compensation. Doing so is essential because state wage hour laws often differ from the Fair Labor Standards Act. It is, therefore, crucial for employers to understand the differences.

Sometimes, the differences are simple, such as when the amount of the state minimum wage that must be paid is greater than the federal counterpart. For example, New York just increased its minimum wage, as of January 1, 2005, from $5.15 to $6.00; then to $6.75 as of January 1, 2006; and, again on January 1, 2007 to $7.15 per hour. Connecticut also has a higher minimum wage and has regulations specific to certain industries, such as retail and restaurants, with provisions for minimum daily earnings, an expanded definition of "working time" and strict requirements for paying servers a sub minimum wage. Other jurisdictions with higher minimum wage rates are Massachusetts, at $6.75, and the District of Columbia, at $6.60.

In November, Florida votes overwhelmingly approved a constitutional amendment to require all employers with employees in Florida to pay a minimum wage of $6.15 per hour, effective in six months. Thereafter, since the minimum wage is linked to the consumer price index, it will adjust automatically each year.

Some states have not enacted laws requiring overtime compensation. These states include Alabama, Arizona, Delaware, Florida, Georgia, Louisiana, South Carolina, Tennessee, Texas, Utah and Virginia. Other states interpret their overtime pay provisions in a manner similar to the Fair Labor Standards Act. Among the states whose overtime laws are consistent with the FLSA are Connecticut, Indiana, Kentucky, Maine, Maryland, Michigan, Missouri, New York, North Carolina, Ohio, Pennsylvania, Washington and Wisconsin. The District of Columbia also requires overtime for work in excess of 40 hours in a work week by non-exempt employees.

Several States Have Unique Overtime Laws

Unlike the states discussed above, New Jersey does not follow the new FLSA tests for exemptions. Instead, New Jersey continues to require that employers satisfy a regulation similar to the "long test" under the old FLSA regulations. According to our contacts at the State, the New Jersey Department of Labor has no plans to modify its regulations.

Other states also have unique overtime pay laws. For example, California requires daily overtime for hours worked in excess of eight (8) in a day by non-exempt employees, as well as mandatory overtime compensation for work in excess of 40 hours in a week and work on the 7th day in any work week. In addition, California law mandates that non-exempt employees be paid at a rate of no less than twice the regular rate for work in excess of 12 hours in a work day.

Colorado has a similar overtime pay provision which mandates overtime pay for hours in excess of 40 in a work week or over 12 hours in a workday. Another provision requires overtime pay when a non-exempt employee works over 12 consecutive hours (even if the work spans two work days). Kentucky's law requires overtime pay for non-exempt employees who work more than 40 hours in a work week and, in addition, for certain employees who work 7 days in a work week.

Finally, some state laws have fewer or different exemptions than the federal law. For example, in April 2004 Illinois enacted a law that adopted the higher salary requirements of the FLSA's new regulations, but expressly rejected the new regulations' changes to the FLSA's "duties" tests. Thus, in Illinois, employers must meet the exemption criteria under both the "old" FLSA duties tests and the new ones.

In contrast to the daily overtime pay requirements of states such as Colorado, California and Nevada, Kansas requires payment of overtime compensation for employees of businesses that are not covered by the Fair Labor Standards Act when non-exempt employees work over 46 hours in a work week. The Minnesota Fair Labor Standards Act requires overtime payments by covered employers when a non-exempt employee works over 48 hours in a work week.

Like Colorado, Nevada requires overtime when an individual works over 8 hours in a day (except where, by mutual agreement, a non-exempt employee works a scheduled 10 hours per day for 4 calendar days within a work week) or when over 40 hours in a work week are worked by non-exempt employees. However, like the Kansas statute, Nevada law statute applies only to certain small businesses not covered by the federal law. Nevada law contains a number of additional exemptions as well. Similarly, while New Hampshire law requires time and one-half of the regular hourly rate for work in excess of 40 hours in a work week, the overtime pay statute does not apply to employers covered by the Fair Labor Standards Act.

What Compensation Is Includable In The Overtime Rate

Under the FLSA, many supplemental forms of compensation are includable in the regular rate of pay. Among the includable "extra" compensation are bonuses, shift differentials and non-discretionary bonuses. However, like the overtime laws themselves, familiarity with all facets of state wage hour laws is essential.

Some state wage hour laws require inclusion of additional forms of compensation in the overtime rate, just as the Fair Labor Standards Act mandates. Other state laws lack that obligation. For example, the Massachusetts wage payment law excludes certain kinds of commissions, as well as bonuses and other incentive pay from the overtime pay rate (while the Fair Labor Standards Act requires inclusion of such additional compensation).

Audit Pay Practices To Insure Compliance with All Statutory Requirements

For employers doing business in states with their own wage and hour laws, figuring out which laws are controlling and what they require can be a complicated task. Unfortunately, many laws contain steep penalties for noncompliance, and frequently more than one employee is affected by an employer's pay policies and practices. The result can be a compounding liability risk, one which may draw the attention not only of employees, but government investigators and unions.

To minimize the risk of noncompliance, pay policies and practices should undergo periodic audit to insure they conform to all applicable state and local wage payment laws, as well as the federal FLSA. Uncovering deficiencies before they come to the attention of employees or third parties gives employers the opportunity to make necessary adjustments and avoid costly investigations, complaints, and lawsuits.

©2005 Jackson Lewis P.C. This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Jackson Lewis and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome.

Reproduction of this material in whole or in part is prohibited without the express prior written consent of Jackson Lewis P.C., a law firm that built its reputation on providing workplace law representation to management. Founded in 1958, the firm has grown to more than 900 attorneys in major cities nationwide serving clients across a wide range of practices and industries including government relations, healthcare and sports law. More information about Jackson Lewis can be found at www.jacksonlewis.com.

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