Labor Department Update… Minimum Wage, Civil Penalties Increase

Employers should be aware of two key developments in the wage and hour arena – a federal minimum wage hike (effective July 24, 2008) and an increase in civil penalties for child labor law violations (effective May 21, 2008). Below is a brief summary of each of these developments.

Federal Minimum Wage

As reported in Ogletree Deakins’ eAlert dated July 23, 2007, Congress increased the federal minimum wage when it passed the Fair Minimum Wage Act of 2007. This law amended the Fair Labor Standards Act (FLSA) to increase the federal minimum wage from $5.15 to $7.25 per hour over three years. Pursuant to that 2007 law, increases in the federal minimum wage occur in three steps – the second step increased the federal minimum wage from $5.85 to $6.55 per hour effective July 24, 2008.

The tip credit that an employer can claim also increased on July 24, since Congress did not address, and hence did not change, the wage an employer is required to pay a tipped employee under Section 3(m) of the FLSA. The FLSA requires employers to pay a cash wage of $2.13 per hour to take advantage of the tip credit, while the tip credit that an employer can claim increases from the current $3.72 per hour to $4.42 per hour. The law is unchanged so that if the employer’s cash wage of $2.13 per hour plus the employee’s tips do not equal $6.55, then the employer is required to pay the difference.

This minimum wage increase will have little impact on many employers since almost half of the states (and the District of Columbia) have established minimum wage rates that exceed the new federal rate. Employers that are subject to the new federal minimum wage should ensure that their payroll records reflect the change and that the proper posters are in place.

A revised federal minimum wage poster that reflects the recently enacted minimum wage increase is available on the DOL’s website. Any employer that has an employee subject to the FLSA’s minimum wage provisions is required to post a notice explaining the statute’s protections. The poster must be in a conspicuous place in the employer’s establishments so as to enable employees to read it.

Civil Penalties

Congress included another change to the FLSA in the Genetic Information Nondiscrimination Act of 2008, which was signed into law on May 21, 2008. Included in this bill is language increasing the civil money penalty (CMP) that the DOL can assess against an employer for violations of child labor laws. First, Congress increased the maximum CMP by 10% (to $11,000) that the DOL can assess for employing minors in violation of Sections 12 and 13 of the FLSA, and the implementing regulations at 29

CFR Part 570. Also, Congress increased the maximum CMP for a violation of the child labor laws that results in the death or serious injury of a minor employee under 18 years old. Where the death or serious injury is the result of a repeat or wilful violation, the DOL may double the CMP to $100,000. The bill also increased by 10% (to $1,100) the maximum CMP that the DOL can assess for repeat or wilful violations of the minimum wage and overtime protections of the FLSA.

The new provisions define a “serious injury” as one that causes: 1) a permanent loss or substantial impairment of one of the five senses; 2) a substantial impairment or permanent loss of the function of a bodily member, mental ability or organ; or 3) a permanent paralysis or substantial impairment that results in the loss of movement or mobility of a bodily member or other body part.

This increase in the DOL’s authority to assess additional penalties is a harbinger of things to come in the remainder of this Congressional session and particularly in the Congress that will convene in 2009. For example, several bills have been introduced in this session to increase the penalty amounts that the federal Occupational Safety and Health Administration can assess and to strengthen the criminal sanctions of the Occupational Safety and Health Act. Several hearings also have been conducted by the House Education and Labor Committee or its subcommittees on this topic. Now that Congress has raised the penalty amounts that can be assessed for child labor law violations, it is just a matter of time until it ratchets up other penalty provisions.

Additional Information

If you have questions about any of these changes, contact the Ogletree Deakins attorney with whom you normally work or the Client Services Department by phone at 866-287-2576 or via email at clientservices@ogletreedeakins.com.

Note: This article was published in the July/August 2008 issue of The Employment Law Authority.