Congress first established a national minimum wage under the Fair Labor Standards Act in 1938, a comprehensive federal law that also includes provisions for overtime pay, record keeping requirements and child labor regulations. Initially enacted to stabilize the post-depression, the federal minimum wage law remains in effect as a tool to protect the lowest-paid workers in the labor force, who lack the bargaining power to secure a subsistence wage. The act specifically covers workers who are engaged in or are in the production of goods for interstate and foreign commerce, and requires a minimum wage for full- and part-time, public- and private-sector workers.
All but five states have subsequently enacted their own minimum wage laws. Many of those states have minimum wage rates that are higher than the federal rate. In situations where an employee qualifies under both state and federal minimum wage laws, the employee is entitled to the higher of the two minimum wages.
Under the act, only “employees” are eligible for a minimum wage. To determine whether an individual qualifies an employee under the act, courts will look at the nature of the relationship between the business and the wage earner. If the court finds that the individual is “economically dependent” on the business to which he or she renders service, employee status will typically be granted. Courts also consider many of the factors used in the common law tort context to differentiate employees from independent contractors (e.g., the degree of control the alleged employer has over the way in which the work is performed, where the person works, whether the person works for others as well, etc.).
The federal minimum wage laws do not apply to certain workers, including executives, administrators, professionals and outside salespersons. Other exceptions apply under specific circumstances to workers with disabilities or full-time students.
The act authorizes the Secretary of Labor to use several methods to evaluate an employer’s conduct and enforce the minimum wage requirement. Congress created the Wage and Hour Division within the Labor Department to allow the wage-hour administrator and the secretary to investigate and detect violations. The division may compel the attendance of witnesses at hearings. It may also require an employer to make records available to the wage-hour administrator, or may sue to stop violations and seek recovery of unpaid benefits for employees.
The penalties for violating the minimum wage laws can be significant. Under the act, an employee may bring a claim on his or her own behalf and on behalf of any “similarly situated” employees. An employer who pleads to or is convicted of violating the law may be subject to a fine of up to $11,000 per violation, and may be personally liable in certain circumstances. Parties denied minimum wage may also seek unpaid compensation, mandatory liquidated damages equal to the amount of the unpaid compensation, reinstatement to their job, and attorneys’ fees.
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