I write often on this blog about the importance of paying attention to the doings of the U.S. Department of Labor (DOL) and such federal regulations as the Fair Labor Standards Act (FLSA), Family Medical Leave Act (FMLA), and others. But prudent business owners and managers don’t only pay attention to federal laws and agencies. You also need to keep up with developments in the state (or states) where you do business — and possibly even in the individual towns where you have locations.
Minimum Wage In The Spotlight
For instance, you probably know the federal minimum wage has been $7.25 per hour since 2009. Some may not be aware, though, this number represents only the “floor” for wages in this country. Individual states (and in many cases, cities and towns) are free to set a higher minimum wage within their borders. And many have. In fact, 29 states and the District of Columbia mandate minimum wages higher than the federal level. The news lately has been full of stories of cities setting their own minimum wage as high as $15 an hour.
When there’s a conflict between the minimum wage set by the federal government and the minimum wage set by state or local government, the FLSA says whichever one is more advantageous for the employees will “rule.” So while the federal minimum is $7.25 an hour, if you have a location in (for instance) Seattle, you’ll need to pay those employees at least $15 an hour to avoid getting in trouble.
It’s Not Only Minimum Wage, Though
What even fewer employers may know, though, is that this general principle doesn’t just apply to minimum wages. When your state or municipality enacts a labor law that’s more generous to employees than the federal law, the state or local law will apply. While an employee can’t file a complaint with the U.S. Department of Labor for a violation of state law, they can — and often do — file complaints with the state labor board. And businesses who are found to have violated their state’s laws are just as much on the hook as those who have violated federal law would be on the hook with the US DOL.
(Or even more so! In Massachusetts, for example, some labor law violations carry a treble damages clause, making a state law violation potentially much more expensive than a federal law violation.)
One company in Washington state recently learned this lesson the hard way.
Demetrio v. Sakuma Brothers Farms, Inc.
Contrary to popular belief, the FLSA doesn’t mandate that overtime-eligible workers have to be paid hourly. Generally speaking, you can pay them any way you want — salary, by the hour, piecework, day rate, whatever — as long as the pay they receive for each workweek, divided by the hours they worked in that week, calculates out to at least $7.25 an hour. And if the employee works overtime, they need to be compensated at the equivalent of time-and-a-half. (So no matter how you pay them, you still need to track their time so you can calculate the equivalent hourly rate and make sure you’re properly compensating for overtime.)
Piece work pay is common in agriculture, and Sakuma Brothers Farms was one of many employers who paid that way. They calculated time worked and made sure their employees were receiving the equivalent of at least $7.25 her hour and proper overtime pay when required. So far, so good. The FLSA says this is perfectly OK.
What tripped them up was a Washington state statute, which stated that employers must allow every employee “a rest period of at least ten minutes, on the employer’s time, in each four-hour period of employment.”
Sakuma Brothers Farms gave employees the required break time, and considered that the piecework pay the workers were getting covered that time. After all, the employees were still making the equivalent of more than the minimum wage even taking the break time into consideration. But two employees filed a suit claiming that by being paid per-piece, the breaks they were getting were not “on the employer’s time” as mandated by the law.
The case went all the way to the Washington Supreme Court, and recently the court sided with the employees. The court ruled that employees must be separately compensated for their break times, distinct from the piecework compensation they receive for their time working. Employers should calculate the rate for the break time by taking the piecework compensation each employee received and dividing it by their number of actual work hours. Their normal piecework pay does not compensate them for their break time.
While most analysts have concluded the overall financial impact on most employers in this case will be minimal, that might not be so the next time around. And for the individual employer who was the subject of this lawsuit, the court costs are almost certainly significant.
The lesson here: don’t assume that you’re in the clear just because you comply with federal law. Your state and local regulations have teeth, too! It pays to consult with your employment law attorney to make sure you comply with all the applicable rules.
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Have you run into any trouble with state or local wage and hour laws? How did you handle it?