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Mary M. Krakow

Mary M. Krakow Employment & Labor

mkrakow@fredlaw.com
612.492.7164
Printable Version

The Federal Minimum Wage Now Exceeds Minnesota’s Minimum Wage – Which One Applies to Your Employees?

By: MARY M. KRAKOW

September 2009

When the minimum wage differs under federal and state laws, employees must receive the higher applicable wage. Effective July 24, 2009, the federal minimum wage rose to $7.25 per hour. Minnesota’s state minimum wage stayed the same: $6.15 per hour or $5.25 per hour, depending on the employer’s annual gross sales made or business done. Because the federal minimum wage is higher than both of Minnesota’s minimum wages, almost all Minnesota employers will need to pay their employees no less than $7.25 per hour, although a few exemptions may apply.

When does federal minimum wage apply?


The minimum wage under the federal Fair Labor Standards Act (FLSA) applies to employees in one of two ways: (1) enterprise coverage, or (2) employee coverage.

Enterprise coverage is triggered when an employer’s annual gross volume of sales made or business done is $500,000 or more and the employer’s employees produce goods for commerce or handle, sell, or otherwise work on goods or materials that have been moved in or produced for commerce. The FLSA broadly defines “commerce” to include any trade, commerce, transportation, transmission, or communication among or between any of the states and sometimes even when the activity is only within one state. Because of the wide net this definition casts, for all practical purposes if an employer meets the $500,000 threshold, the employer and all of its employees are covered by the federal FLSA.

Employee coverage is triggered when an employee is engaged in commerce or in the production of goods for commerce. This rule means that even if the employee’s employer is too small for “enterprise coverage,” the federal minimum wage still applies to the employee, due to FLSA’s broad definition of commerce.

These two definitions mean that the federal FLSA minimum wage will apply to the vast majority of employees except for those who fit within one of the law’s narrow exemptions.

What is the required minimum wage for tipped employees?


While federal law allows an exemption for “tip credit,” Minnesota law does not.

The federal “tip credit” rule allows employers to count the tips some employees receive toward a portion of the federal minimum wage for those employees. Minnesota law, however, prohibits Minnesota employers from using tip credit to meet the minimum wage set by Minnesota or federal law. Minnesota law also prohibits sharing of tips except when an employee voluntarily and individually does so with other employees free of any employer participation.

What is the required minimum wage for teenagers?


Both the federal FLSA and the Minnesota FLSA allow employers to pay employees who are under age 20 at $4.25 per hour during the first 90 consecutive calendar days of employment. This is called the “opportunity wage.” While intended to help promote employment of teenagers during the summer months, the opportunity wage applies throughout the calendar year. Employers are, however, prohibited from terminating or reducing the work hours of other employees to make room for hiring employees eligible for the opportunity wage. Also, after the first 90 calendar days of employment, no less than the applicable federal or Minnesota minimum wage must be paid.

Are there other exemptions from the federal minimum wage?


The most common exemptions from minimum wage requirements are so-called “white collar” exemptions—those employees who meet federal and Minnesota definitions of a bona fide executive, administrative, professional or outside sales employee. Other exemptions apply to certain employees in various types of businesses; for example, amusement or recreational establishments, agricultural companies, and small-circulation newspapers.

Takeaway


Employers with questions regarding possible exemptions to the minimum wage, or other wage questions, are encouraged to contact their employment counsel.