New Federal Wage and Hour Regulations Take Effect

May 23, 2011

The Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) underwent several new developments to be effective on May 5, 2011. The developments relate to amendments made to the federal Fair Labor Standards Act (FLSA) and the Portal to Portal Act. Based on the updated federal regulations that may be different from regulations in your state, the following illustrate some of the major provisions:

  • Tips and Wages. As long as an employee’s pay (plus tips) equals or exceeds the federal or state minimum wage (whichever is higher), an employer may pay a non-exempt employee (who earns tips) less than the minimum wage and may use the individual’s tips to make up any difference. In addition, an employer should notify employees of any tip credit usage, and the employees are to keep all tips received unless tip pool amounts are to be shared among those who customarily earn tips. Also, while the FLSA does not impose a maximum contribution to a valid tip pool, an employer must notify employees of any required contribution amount. (Note: The DOL raised the maximum federal tip credit from $4.42 to $5.12 per hour.)
  • Sub-minimum Wage. An employer may pay an employee (who is under 20 years of age) a sub-minimum wage of not less than $4.25 per hour for the employee’s first 90 calendar days of employment.
  • Stock Options. Stock options are to be excluded from the calculation of an employee’s regular rate of pay.
  • Fire Protection Activities. Regarding employees involved in fire protection activities, the amount of non-exempt work in which such an employee (considered as exempt) may participate is not limited. Regarding exempt employees engaged in law enforcement activities, however, a 20 percent limit for such work remains in effect.