State vs. Federal: Which Wage Laws Apply?

Federal wage laws, like the Fair Labor Standards Act (FLSA), apply to employers across the nation. But when you have employees in a state like Hawaii that has its own wage laws, how do you know which one applies to you?

Before we dig into what to do, let’s quickly define what the FLSA is all about.

FLSA: Understanding the Basics

The FLSA, first enacted back in 1938, is a federal law that sets wage and hour standards for basic minimum wage and overtime, but also child labor, recording keeping, and more. It affects nearly all employers. Do you have two or more employees? Then the FLSA applies to you.

So what do you need to know about this federal law? Here’s the 1,000 foot overview of the FLSA and its four main components:

1. Minimum wage

One of the major guidelines set out by the FLSA is that all workers, except those that are exempt, must be paid a national minimum wage. This federal minimum wage is the lowest* possible amount an employer can pay its hourly employees. It officially took effect in 1938, when the FLSA was signed into law. In the 81 years since its debut, the federal minimum wage has increased from $.25 to $7.25 per hour today.

* Many states, including Hawaii, also have minimum wage laws. Continue reading to make sure you know what to do when employees are subject to both state and federal minimum wage laws. (Hint: It’s not okay to pay $7.25 per hour in Hawaii).

2. Overtime pay

The FLSA also sets standards and rules for overtime pay. This is where you start to hear a lot about the two basic types of employees: “exempt employees” and “non-exempt employees.” This is a critical employee classification that affects whether or not an employee qualifies for minimum wage or overtime pay. That’s because the term “exempt” means exempt from being paid overtime.

So how do you know if an employee is exempt or not-exempt from overtime pay? It depends on specific criteria set by the FLSA around:

  1. How much money the employee is paid ($$$ earned per week*)
  2. How the employee is paid (hourly vs. salary)
  3. Job duties, or the nature and responsibilities of the work they do, and their level of decision-making (executive, administrative, professional, outside sales).

In general, an employee must meet specific criteria in all three areas in order to be exempt from receiving minimum wage and overtime pay.

* Like minimum wage, Hawaii law also has slightly different requirements that employers here need to follow. For example, according to the FLSA, exempt employees must earn at least $455 per week. However, according to Hawaii Wage and Hour law, employees must earn $2,000 per month. Psst…Are you making these common wage and hour mistakes?

3. Child labor

The FLSA also protects the rights of those under the age of 18 by establishing how businesses can employ minors so that when they work, the work is safe and does not jeopardize their health, well-being, or educational opportunities. Are you employing 14 and 15 year olds? What about 16 or 17 year olds? There are different requirements by their age. You can learn more about the details on child labor here.

4. Recordkeeping & Reporting

Lastly, the FLSA establishes the type of information employers must maintain about their workers (e.g. Employee’s full name, SSN, total hours worked each week, basis on which employee’s wages are paid, etc.), and how long they must keep these records. You can read the full list of requirements here. Hawaii law also has its own provisions for recordkeeping also.

State requirements: Hawaii Wage & Hour Laws

Now that you have a general idea about the federal Fair Labor Standards Act, what about state requirements? What are they? Which laws have more authority? And what should employers do when these laws conflict?

Let’s dig in.

Some states, like Hawaii, have their own wage and hour laws, which provide greater protection for employees than what is provided under federal law. Hawaii is a prime example. Under Hawaii Wage and Hour laws, we provide protections and benefits to employees that go above and beyond what’s covered in the FLSA.

For starters, Hawaii Wage and Hour law applies to any employer with one or more employees in the State of Hawaii, whereas the FLSA applies to any employer in the country that has two or more employees, as well as to companies with $500,000 or more in annual revenue, or companies engaged in interstate commerce.

What to do when FLSA and Hawaii labor laws differ

So what should employers do?

Generally, when state and federal labor laws differ, employers must defer to the law that is more beneficial to the employee it governs.

  • Example #1: Minimum wage is a good, easy example. Hawaii’s minimum wage is now $10.10 per hour, which is almost 40 percent higher than the federal minimum wage of $7.25 per hour. That said, employers must defer to our state minimum wage instead of the federal wage simply because it’s more generous.
  • Example #2: Recordkeeping is another good example. While FLSA requires employers to keep payroll records for three years, Hawaii law is stricter: six years for payroll records, and 7-10 years for medical records. To be safe, it’s recommended that Hawaii employers keep all records for seven years, and medical records for the full 10. Records that are part of an ongoing legal matter must be kept until the issue is resolved.

Minimum wage and recordkeeing are just two (of numerous) examples.

While the myriad of state and federal labor laws might seem daunting, employers can protect themselves and keep headaches to a minimum by understanding the requirements and being prepared. And, if you need extra support, an HR partner can help.

Download our free ebook to learn how an HR partner can help employers stay compliant with local and federal laws with ease.

Are You Making These Common Wage & Hour Mistakes?

Wage and hour laws can be complicated, but it’s important to get it right. Here are 5 common mistakes employers make and how you can avoid them.

Wage and hour compliance can be complicated, but it’s important to get it right. That’s because mistakes can be costly. Earlier this year, the U.S. Department of Labor’s Wage and Hour Division in Honolulu investigated companies at several Hawaii malls and found numerous violations, including employers who were failing to pay overtime, and violations of child labor laws. The companies were required to pay nearly $700,000 in back wages to 339 employees, and fined $60,000 for the child labor violations. In addition, a nationwide crackdown in 2018 resulted in employers paying more than $304 million in back wages to workers.

The Fair Labor Standards Act (FLSA) is a federal law that governs how businesses pay their employees, how pay is handled for salaried and hourly workers, and how businesses can employ minors.

Here are five common mistakes employers make around wage and hour compliance—and how you can avoid them:

Mistake #1: Misclassifying an employee as exempt, based on their job title.

Exempt employees are paid a fixed salary, regardless of how many hours they work each week—and they don’t qualify for overtime. However not all employees qualify for exempt status. There are four main types of workers who can legally be paid on a salaried basis—executive, administrative, professional, and outside sales.

It is important to remember that you can’t just classify an employee as exempt based on their job title. Each category has specific job requirements that must be met in order to qualify—like a sales person whose primary responsibility is making sales or obtaining orders, or a professional whose job involves performing work that requires advanced knowledge of a subject like medicine or law.

What to do: Check the employee’s actual duties, not just their job title, to make sure you’re on solid legal ground in classifying the employee as exempt.

Mistake #2: Allowing under-age employees to work past 7 p.m.

Many businesses employ minors after school or for summer jobs. However there are special rules for under-age employees, especially younger workers aged 15-16. On school days, it’s illegal for these employees to work before 7 a.m. or after 7 p.m., and they can’t work more than three hours per day. (On non-school days, they can work up to 8 hours, but still can’t work before 6 a.m. or after 9 p.m.).

There are no restrictions on hours for older teens, but employees aged 16-17 can’t be expected to work at times that they are required to be attending school, and they aren’t allowed to perform certain kinds of duties, like working with power wood-working tools, using restaurant machinery, or doing any kind of roofing.

What to do: Make sure under-age workers have provided documentation like a work permit, and be careful not to schedule them to work evening shifts or longer than the maximum number of hours.

Mistake #3: Not paying for all the hours an employee works.

FLSA requires employers to pay employees anytime they perform work, whether it was authorized or not. That means that if an employee does work they were not asked to do—or even work that was performed against a supervisor’s wishes—you still have to pay them for the time. Employees also must be paid for some travel time, such as time spent driving from one job site to another, and for things like mandatory training.

What to do: If an employee does work they were not authorized to do, take disciplinary action if necessary to correct the behaviorbut pay them for the time.

Mistake #4: Sharing tips with managers.

Some tipped employees keep their tips, while others pool them. Both options are allowed, but when employees share their tips, certain rules apply.

There are two types of tip sharing:

  • Voluntary tip sharing, in which the employees pool their tips and mutually agree on how to divide them up.
  • Mandatory tip sharing, in which the company has a set policy dictating who receives tip-outs, and how much goes to each person. Regardless of how tips are split up, however, they can’t be shared with managers.

What to do: The best practice is for the company to draw up a written policy for pooling tips, making it clear that tips cannot go to management.

Mistake #5: Not allowing employees to record all the hours they work.

Employees who are paid hourly must keep a daily record of the time they spend on the clock, and they’re eligible for overtime (1.5 times their usual hourly rate) anytime they work longer than 40 hours in the course of the work week. It’s illegal to ask employees to falsify their timesheets, or to tell them to simply report working exactly 40 hours every week.

What to do: Set up a timesheet or time-tracking system and make sure employees record the hours they actually work. Pay employees for overtime, or adjust schedules to keep their hours under 40 hours per week. Daily time records must be retained for at least 6 years.

Failing to comply with wage and hour rules can result in serious consequences and costly fines for employers, as the recent Labor Department crackdown showed. Fortunately, by paying attention to the FLSA and understanding what’s required, you can protect your business and take care of your employees by paying them fairly.

Wondering how an HR partner can help employers manage compliance and more? Download our free ebook to get the inside scoop.

6 Ways to Keep Employees Motivated This Summer

Whether it’s the long sunny days, the allure of the beach, or the distraction of having kids home from school, summer is a prime time for employees to start feeling a little checked-out. Countries like France embrace this challenge by closing shop so that everyone can take a full four to six weeks of vacation.

But if that approach is pas possible for your organization, try these six tips to keep employees engaged and motivated until Labor Day:

1. Take meetings outside.

If you’re not using a whiteboard or PowerPoint, give everyone a break from the stale office air and enjoy the fresh breeze and warm weather by gathering around a picnic table, or even just meeting in your building’s courtyard or atrium. Or, if your team is up for it, get your blood pumping with a walk-and-talk around the block. Studies have found that walking meetings are not just more creative, but also promote better communication.

2. Plan a company outing.

With reliably sunny weather, summer is a great time to organize an outdoor team building event at the beach or a park, whether it’s a day of games and group activities, or just a family-friendly barbecue for employees to connect in a relaxed atmosphere. If getting off-site isn’t an option, consider organizing a summer-themed pau hana at your place of work. Whatever you do, plan it in advance and let employees know it’s coming up, so they have something to look forward to.

3. Offer summer hours. 

If it works for your business or organization, consider offering your employees “Summer Fridays,” where they can leave the worksite a few hours early on Friday afternoons between Memorial Day and Labor Day. Expand your remote work opportunities, so employees can extend travel plans without using up their PTO to do so. Or give employees more opportunities to work from home, so they can take advantage of a more relaxed environment and avoid sitting in hot summer traffic. But for workplaces that can't do summer hours, consider offering 1-2  floating holidays during the summer months to give families a little extra ohana time.

4. Add some extra incentives. 

Now is a great time to show employees that you appreciate their hard work. Treat your team to “breakfast on the boss,” or hold a drawing for prizes like gift cards, tickets to sporting events or concerts, movie tickets, and more. And a simple “thank you” is always a good way to let employees know they’re valued and important.

5. Give back to the community.

Surveys show that employees, especially Millennials, are more engaged when they feel their place of work is making a difference in the community. Consider hosting a volunteer day, where employees can choose to spend the day doing a beach cleanup, feeding the homeless, or volunteering with a local organization, like Access Surf or Habitat for Humanity. Or take a slightly non-traditional approach to giving back and consider allowing working moms or dads to bring their kids to work on select days of the week during summer break.

6. Take time for wellness. 

There’s plenty of evidence that workers are more productive and engaged when they’re fit and healthy. Encourage employees to head outside for a team run or walk on their lunch breaks, organize a company-wide fitness or step-counting challenge, or consider offering incentives to employees who walk or ride a bike to work. And don’t forget to offer healthy snacks like fruit or protein bars in the break room!

Keeping employees motivated is important year-round, and there’s no better time to step up your engagement game than in the dog days of summer.

Want more? Download our Employee Engagement Playbook to get even more tips on how to keep employees engaged at work this summer.