Wage and Hour Laws in 2022: What Employers Need to Know

Whether a mom-and-pop shop with a handful of employees or a large corporation staffing thousands, complying with certain state and federal labor laws is required of every business. Failure to adhere to these rules and regulations set forth by the government can lead to significant penalties and fines, not to mention plenty of bad publicity. It’s also possible for workers to file a complaint against their employers, which could result in a costly lawsuit. 

For these reasons, it’s critical for employers to familiarize themselves with the Fair Labor Standard Act (FLSA) – the labor law established to ensure employees are compensated fairly for the work they perform. This law governs such workforce practices as minimum wage, overtime pay, meal breaks, rest periods and sick leave.

While wage and hour laws are nationally enforced, they do vary from state to state, and can often change. Staying current with the latest changes in the laws that apply to your business will not only help you avoid hefty fines, but also help maintain a harmonious work relationship with employees. So, what exactly is the federal wage and hour law?

Minimum Wage

Simply put, all employees covered by the Fair Labor Standard Act must be paid at least the minimum wage. At the time of this writing, federal minimum wage laws set the minimum wage at $7.25/hour. Many states, however, have their own minimum wage requirements that call for more than the federal amount, and these amounts can vary significantly. For instance, the state minimum wage in Nebraska is $9/hour, while in New York it is now $14.20/hour.

Presently, 30 states and Washington D.C. have minimum wages above the $7.25 federal minimum wage. Only five states have not adopted a state minimum wage: Alabama, Louisiana, Mississippi, South Carolina and Tennessee. Two states, Georgia and Wyoming, actually have a minimum wage below $7.25/hour. One thing is universal, however, and that is any covered non-exempt employee will always be entitled to the highest minimum wage amount available to them.

It should be noted that there are some exceptions to receiving the federal minimum wage. Employees who collect the bulk of their pay in tips usually can be paid a lesser minimum wage than $7.25/hour. On the federal level, the tipped minimum wage is $2.13/hour. However, some states have a higher tipped minimum wage, and some states call for tipped employees to be compensated the same minimum wage as non-tipped employees. Additionally, employees under the age of 20 may be paid a minimum wage of $4.25 per hour for their initial 3 months of employment, or until they reach 20 years of age. After such time, they must be paid the regular minimum wage rate.

Earlier this year, another exception to the federal $7.25 minimum wage rate was made. The Biden administration directed its agencies to increase the minimum wage for federal employees to $15 an hour. The new policy, which took effect Jan. 30, 2022, will give a significant pay raise to approximately 70,000 federal workers. 

Overtime Pay

Along with a minimum wage, employees must be provided additional compensation apart from their standard work hours. This is considered overtime pay, and according to the US Department of Labor, employers must pay covered non-exempt employees at least one and a half times their standard pay in the event they work more than 40 hours in a single workweek. There is no limit to the number of hours employees aged 16 and older can work in any given workweek. However, the FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest. 

While not every employee’s workweek has the same start and end dates, they all have the same parameters in that they are fixed and regularly recurring periods of 168 hours — seven consecutive 24-hour periods. A workweek can begin at any hour of any day. In addition, different workweeks can be set up for different employees or groups within the company. In most cases, any overtime payment earned during a given workweek must be paid on the regular pay day for the week in which the wages were earned.

Exempt vs. Non-exempt Employees

Since ONLY non-exempt employees are eligible for overtime pay, it’s important to identify the qualifications needed for this status. According to the Department of Labor, any covered employee who earns less than $35,568 per year, or $684 per week, is entitled to overtime pay for work performed in excess of 40 hours during one workweek. Further qualifying classifications of non-exempt employees include those that are directly supervised by a manager, and those not in an executive, administrative, professional, or outside sales position.

An exempt employee on the other hand is not subject to the same rules and regulations established by the FLSA. Those in this classification do not have to be paid overtime for extra hours worked during a given workweek. To hold exempt status, employees must earn in excess of $35,568 annually and their work must fall under an executive, professional, administrative, or outside sales category. 

The inability to distinguish non-exempt from exempt employees can negatively affect business in a variety of ways, including fines and penalties, regulatory enforcement action, and employee lawsuits for failure to pay overtime. In some cases, reclassifying an employee from exempt to non-exempt (or vice versa) is called for, but it can be a tricky path to navigate. 

For instance, a non-exempt employee whose status is changed to exempt may be angered by no longer being eligible to earn overtime pay. On the other hand, an exempt employee who is reclassified as non-exempt may see the change as a bump down in status at the company. Before making any changes to an employee’s status, management should take the time to explain the reasoning behind the decision. Whichever status an employee is given, they are still equally entitled to such additional protections as the Family Medical and Family Leaves Act, the Occupational Safety and Health Act, American’s with Disabilities Act, and even file for worker’s compensation. 

Final Thoughts

Better understanding the wage and hour laws your business is subject to can certainly help safeguard against costly fines and potential lawsuits. State labor law guides can serve as an excellent resource to determine the rules and regulations required in your area. 

Working with skilled HR and workforce management professionals is another effective way to help navigate the minefield of these unique and ever-changing laws, as is receiving legal advice from attorneys well-versed in all types of labor law. The ultimate goal is to always stay on top of the necessary labor legislation that must be followed.