Canadian Payroll Reporter

3 Canadian HR Reporter, a Thomson Reuters business 2014 News CPR | August 2014 CPR | August 2014 A look at labour standards south of the border How does the U.S. treat key labour standards issues? BY SHEILA BRAWN The UniTed STaTeS is our closest neigh- bour and largest trading partner. American movies, TV and music permeate our culture; we have a lot in common with Americans. Yet, our two countries are not identical — especially when it comes to issues around labour standards. Requirements for minimum wage, over- time pay, paid vacations, statutory holidays and unpaid leaves are, in many cases, different from our rules. Here is a brief look at how U.S. law treats these key labour standards issues: Fair Labor and Standards Act (FLSA) The FLSA is a federal government act that sets out minimum wage and overtime pay rules (as well as rules for keeping records and employing children) for full- and part-time workers in the private sector and in federal, state and local governments. It covers most employees in the United States regardless of the state in which they work. The act exempts some employees from its minimum wage or overtime requirements. For example, executive, administrative and professional employees are exempted from both minimum wage and overtime stan- dards, depending on the type of work they do and their salary level. Certain commis- sion-based employees who work in retail businesses are covered under the minimum wage requirements, but are exempt from overtime pay. (For a full listing of exemp- tions, contact the U.S. Department of Labor.) In addition to the FLSA, most states have their own minimum wage, overtime and child labour laws that closely reflect the FLSA. State laws that are more lenient than the FLSA apply only to employers and em- ployees not covered by the federal law. If a state law is stricter than the federal law, all employers and employees in the state, even those covered by the FLSA, are covered by the state law unless they are specifically ex- empted. Minimum wage The rules for paying minimum wage in the United States differ from those in Canada, where each province and territory sets its own minimum wage rate without require- ments from the federal government. In the United States, all employers covered by the FLSA are required to pay at least the nation- al minimum hourly wage rate of $7.25 (all figures in US dollars) to all employees who are not exempted from the act. There are exceptions to the $7.25 require- ment. For instance, employers may pay new hires who are under 20 years old $4.25 per hour for their first 90 calendar days of em- ployment. Employers that pay tips may credit the tips against their minimum wage obligations to employees who work in jobs in which they customarily and regularly receive more than $30 a month in tips. Employers may pay these employees as little as $2.13 per hour and still comply with the law. However, employers must make up any difference between the minimum wage and the combination of $2.13 plus tips to en- sure each employee makes at least the mini- mum wage. Most states have set their own minimum wage rates. If the rate is higher than the fed- eral rate, it will apply. If it is lower (or there is no minimum wage rate), the federal rate will apply for employees covered by the FLSA. There are no state minimum wage provi- sions in Alabama, Louisiana, Mississippi, South Carolina or Tennessee. Currently, a higher minimum wage rate applies in 23 states plus the District of Co- lumbia ($9.50). The highest state rates are in Washington ($9.32), Oregon ($9.10) and California ($9.00). Minimum wage rates have received a lot of attention in the United States this year. President Barack Obama has pushed for in- creasing the national minimum wage rate to $10.10 per hour. He has so far been unable to convince Congress to do this, but some states plan to raise their minimum wage to at least that amount over the next few years. Connecticut plans to have a minimum wage of $10.10 by 2017, with increases phased in beginning in January. Hawaii and Maryland will also phase in minimum wage changes, with the rates set to reach $10.10 per hour by 2018. The District of Columbia is phasing in an $11.50 per hour rate by July 1, 2016, and will eventually index its minimum wage rate. At the end of June, the governor of Mas- sachusetts signed a law to raise the state's minimum wage rate by $3 over the next three years to $11 per hour. Minimum wage rates are also going up in other states, although not as high as Obama's desired $10.10. Delaware, Michigan, Min- nesota, Rhode Island, Vermont and West Virginia have announced wage hikes to oc- cur over the next four years. Illinois is considering holding a referen- dum on its minimum wage rate in Novem- ber, asking voters if the state's minimum wage should rise from $8.25 per hour to $10.00 by Jan. 1, 2015. Some American cities have also imple- mented minimum wage laws. In June, Se- attle's city government voted to phase in a minimum wage increase from $9.32 per hour to $15, beginning next April. San Fran- cisco is also considering a $15-per-hour minimum wage and politicians in Chicago are discussing raising the rate there from $8.25 to $13 by 2018. Overtime Overtime requirements under the FLSA are based on weekly hours worked, not daily hours. Employers have to pay overtime after an employee covered by the act has worked 40 hours in a workweek, unless the employ- ee is exempt from the requirement. There is no limit on the number of hours an em- ployee who is at least 16 years old can work in a week. The overtime pay rate is 1.5 times the em- ployee's regular rate. The regular rate is not necessarily the basic rate to which the em- ployer and the employee may have agreed. To determine the regular rate of pay, em- ployers have to add certain supplemental payments they made to the employee (such as non-discretionary bonuses, shift differ- entials and incentives) to the employee's pay and then divide the total by the number of hours the employee worked. Most states follow the federal require- ments for overtime; however, a few states also have daily overtime requirements, in- cluding Alaska, California, Colorado and Nevada. As with minimum wage, there are many states that do not have their own overtime provisions, such as Alabama, Arizona, Delaware, Idaho, Iowa, Louisiana, Missis- sippi, Nebraska, Oklahoma, South Caro- lina, South Dakota, Tennessee, Texas, Utah, Virginia, and Wyoming. In these states, the federal overtime rules apply for workers cov- ered under the FLSA. Paid vacations and statutory holidays There are no rules under the FLSA requir- ing employers to provide employees with a minimum amount of paid vacation time per see Many on page 8

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