In June 1938, President Franklin D. Roosevelt signed the Fair Labor Standards Act, which banned unjust child labor and established a national minimum wage of 25 cents per hour. That remains the primary federal legislation that protects hourly workers today, though it's been modified since to increase the minimum wage and apply to a larger percentage of the workforce. In addition, many states have enacted laws that require additional compensation for hourly workers beyond the federal minimum requirements.
Fair Labor Standards Act
Unlike some functional areas where the federal government has volumes of rules and regulations governing company behavior, such as finance, a single law governs the relationship between employers and their hourly employees. The FLSA establishes a federal minimum wage, a process to determine which jobs are overtime eligible and a requirement that overtime-eligible employees are paid one-and-a-half times their hourly rates for each hour they work over 40 in a week. The FLSA also requires employers to keep detailed records of hours worked and provides additional protections for workers under the age of 18.
Paying Less Than Minimum Wage
An employer can pay an hourly employee who earns at least $30 in tips a week no less than $2.13 per hour as of 2015. However, if the combination of the employee's hourly rate and tips on any given day is less than the number of hours worked times the minimum wage, the employer must pay an additional amount to bring the employee's daily wages to the minimum wage. Employers also are permitted to pay employees under 20 years of age a rate of $4.25 an hour, as of 2015, for the first 90 consecutive calendar days of employment.
Computing Overtime Pay
Suppose an employee making $10 an hour worked 43 1/2 hours in a week. The employee's weekly pay is $10 an hour times 40 hours plus $15 dollars an hour times 3 1/2 hours, or $452.50. If an employee who is paid per item produced earns $400 but works 43 hours, the employee is entitled to three hours of overtime compensation. The effective hourly rate is $400 divided by 43 hours, or $9.30 per hour. The overtime rate is 1.5 times $9.30 or $13.95 per hour. The overtime compensation due to the employee is 3 times $13.95 or $41.85.
What's Not Required
The FLSA does not require companies to pay employees for holidays, sick days or vacation, or to pay overtime for working on holidays. It does not restrict the number of regular or overtime hours a company can require an employee to work or require companies to provide rest periods or meal periods for employees other than nursing mothers. However, companies that voluntarily provide breaks must pay employees while on breaks that last 20 minutes or less.
Additional State Protections
Many states provide additional protections beyond the FLSA. Twenty-nine states and the District of Columbia have a higher state minimum wage and tipped wage. Eight states require paid rest periods, 21 require unpaid meal periods and 35 states require unpaid meal periods for workers under the age of 18. California, for example, requires overtime pay for every hour worked over eight in a day and over 40 in a week, requires overtime pay for the first eight hours of the seventh consecutive work day, and mandates double-pay for all hours worked over 12 in a day and over eight on the seventh consecutive work day.