The Fair Labor Standards Act (“FLSA”), provides that covered employees must be paid no less than the current state or federal minimum wage, whichever is greater, for all hours worked. The Delaware minimum wage is $7.15 trumps the current federal minimum wage of $6.55.
Although the concept of minimum wage is not a complicated one, there are some issues that can blur the obviousness of the hourly wage amount. One such issue is what exactly should be included as compensation when determining whether minimum wage has been paid for all time worked. Included in the definition of compensation are:
- Wages (salary, hourly, piece rate);
- Certain bonuses;
- Tips received by eligible tipped employees (up to $4.42 per hour); and
- Reasonable cost of room, board , and other “facilities” provided by the employer for the employee’s benefit.
The fifth type of compensation, “board and lodging,” presents some nuances of its own. For example, it cannot exceed the actual cost of the facilities provided and cannot include a profit for the employer. The employer must follow good accounting practices when determining the reasonable cost. And, if no cost is incurred, the employer may not take a credit.
Deductions from pay can present major problems when they bring an employee’s hourly wage below the minimum wage. Deductions are illegal if:
- Made for an item considered primarily for the benefit or convenience of the employer; and
- Reduce the employee’s earnings below the required minimum wage.
Some of the most common examples of illegal deductions include:
- Tools used for work;
- Required uniforms;
- Damages to employer’s property;
- Cash-register shortages.
Tipped employees are not as problematic as illegal deductions but can be complex. To be considered a “tipped employee” under the FLSA, the employee must work in an occupation in which he customarily and regularly receives more than $30 per month in tips. Tipped employees must be paid at least $2.13 per hour in cash by the employer, who may claim a “tip credit” for the rest of the minimum wage. The employer may claim the “tip credit” only if:
- The employer informs each tipped employee about the tip-credit allowance, including the amount to be credited before the credit is utilized;
- The employer can document that the employee received at least enough tips to bring the total wage paid up to minimum wage or more;
- All tips are retained by the employee and are not shared with the employer or other employees, unless through a valid tip-pooling arrangement.
An example of the FLSA’s minimum-wage requirements in action:
Employee receives $9 per hour for 40 hours plus $5 in commission and $20 in reasonable cost of room and board.
Total earnings = $360 + $5 + $20 = $385
Total earnings / total hours = $385 / 40 = $9.63