Minimum Wage

The minimum hourly rate of compensation for labor, as established by federal statute and required of employers engaged in businesses that affect interstate commerce. Most states also have similar statutes governing minimum wages.

Along with a requirement for overtime pay and restrictions on child labor, the minimum-wage law is one of the most significant, substantive obligations created more than 50 years ago by the FAIR LABOR STANDARDS ACT of 1938 (FLSA) (29 U.S.C.A. §§ 201 et seq.). The FLSA culminated a long struggle for state and federal protective legislation for workers that had begun during the nineteenth century.

The original campaign for minimum-wage legislation in the United States began at the state level and resulted from growing public concern about the prevalence of sweatshops—workhouses where recent immigrants, women, and young children were paid substandard wages. Proponents of minimum-wage legislation appealed to society's sense of obligation to act through its elected officials to ensure an adequate standard of living for all working citizens.

In 1912, Massachusetts, an industrial state, was the first state to enact minimum-wage legislation. The momentum continued, and by 1920 13 states, Puerto Rico, and the District of Columbia had enacted minimum-wage programs. The Great Depression moved even more states to enact protective minimum-wage legislation, and by 1938 25 states had some form of minimum-wage law. In creating minimum wage legislation, the states generally used three minimum wage models. The Massachusetts model established a wage commission that recommended voluntary minimum-wage rates based on what commission members determined was the best combination of a "living wage" for employees and the "financial condition" of the employer's business. The next model established a similar wage commission but disregarded the financial conditions of the employer, made the minimum wage compulsory, and established sanctions for non-compliance. The third law, the Utah model, established a flat rate of minimum compensation for all covered workers.

Despite the success of state legislatures in creating minimum-wage laws, state supreme courts and, ultimately, the U.S. Supreme Court rejected as unconstitutional any legislation that interfered with an employer's freedom to contract with employees over wages.

Under the leadership of President FRANKLIN D. ROOSEVELT, Congress passed the NATIONAL INDUSTRIAL RECOVERY ACT OF 1933 (NIRA) (June 16, 1933, ch. 90, 48 Stat. 195). NIRA granted the president authority to establish minimum-wage and maximum-hour standards for all private-industry workers. Its legal basis was the federal government's power to regulate interstate commerce. The U.S. Supreme Court, however, rejected the NIRA's legal basis as unconstitutional in ALA Schechter Poultry v. United States, 295 U.S. 495, 55 S. Ct. 837, 79 L. Ed. 1570 (1935). In fact, from 1923 in Adkins v. Children's Hospital, 261 U.S. 525, 43 S. Ct. 394, 67 L. Ed. 785, to 1937 in Morehead v. New York ex rel. Tipaldo, 298 U.S. 587, 56 S. Ct. 918, 80 L. Ed. 1347, the Court consistently ruled against the constitutionality of all minimum-wage legislation.

During his second administration, President Roosevelt worked with members of Congress to create a modified version of the labor provisions of the NIRA, and in 1937 the FLSA was introduced. Although national business lobbies and agricultural interests vigorously fought the proposed legislation—even organized labor did not support it—Congress passed the FLSA, and it was signed into law on June 25, 1938. Referring to the FLSA the night before signing the bill into law, President Roosevelt declared, "Except perhaps for the SOCIAL SECURITY ACT, it is the most far-reaching, the most far-sighted program for the benefit of workers ever adopted." In a landmark decision in 1941 (United States v. Darby, 312 U.S. 100, 61 S. Ct. 451, 85 L. Ed. 609), the U.S. Supreme Court found the FLSA constitutional:

[I]t is no longer open to question that the fixing of a minimum wage is within the legislative power and the bare fact of its exercise is not a denial of DUE PROCESS under the Fifth more than under the Fourteenth Amendment.

The minimum-wage law has evolved significantly since the Court declared it constitutionally sound in United States v. Darby. The federal minimum wage remains the same until Congress passes a bill to raise it and the president signs the bill into law. The minimum wage started at 25¢ per hour, and Congress has increased it 18 times. Since the law was enacted, increases to the minimum wage have been signed into law by Presidents HARRY S. TRUMAN, DWIGHT D. EISENHOWER, JOHN F. KENNEDY, LYNDON B. JOHNSON, RICHARD M. NIXON, JIMMY CARTER, GEORGE H. W. BUSH, and BILL CLINTON. The increases in the minimum wage have been sporadic. For example, the wage rose five times in the inflationary 1970s but was unchanged for the last nine years of the 1980s. In 1989, the FLSA was amended to raise the minimum wage in two steps: from $3.35 to $3.80 per hour on April 1, 1990, and from $3.80 to $4.25 per hour on April 1, 1991.

Every time Congress considers legislation to increase the minimum wage, it must ponder what constitutes a living wage—a wage that is sufficient to provide a worker with food, clothing, and shelter. Along those lines, the CONGRESSIONAL RESEARCH SERVICE estimated that the minimum wage would have to rise to $6.75 per hour in 1996 to equal the purchasing power that it represented in 1978.

Congress most recently amended the minimum-wage law with the Minimum Wage Increase Act of 1996 (Pub. L. No. 104-188, sec. 2104(a), 110 Stat. 1228 [amends sec. 206]). Congress increased the minimum wage to $4.75 per hour effective October 1, 1996 and increased it to $5.15 per hour effective September 1, 1997.

The minimum wage is the most direct and definitive measure to guarantee workers a living wage, but the FLSA (and thus its minimum-wage provisions) does not protect all employees. In 1988, of the approximately 110 million wage and salary earners in the United States, the FLSA did not cover about eight million workers because of coverage limits, nor another 28 million workers because of exemptions.

The minimum-wage law can be enforced by employees themselves, by the secretary of labor, or by the attorney general. Under section 216(b) of the FLSA, employees can file suit in federal or state court to enforce their rights to minimum wages and overtime compensation. Employees also can seek redress if employers retaliate against them for trying to enforce their rights under the FLSA. The secretary of labor can enforce the act on behalf of employees under sections 216(c) and 217 by either filing a wage suit on behalf of the employees or by seeking an INJUNCTION.

If a suit by either the employees or the secretary of labor is successful, the FLSA authorizes recovery of any unpaid minimum wages and/or overtime compensation; with some exceptions, the injured party may be able to recover an equal amount in LIQUIDATED DAMAGES, as well. In addition, employees who win FLSA suits may be awarded attorneys' fees. For repeated or willful violations of the minimum-wage provisions, the secretary is authorized to assess civil penalties, subject to administrative review, of up to $1,000 per violation (29 U.S.C.A. § 217(e)).

Finally, the attorney general has the authority to file criminal actions for FLSA violations, although this authority has rarely been used.

Although the FLSA is the most significant federal wage statute, a number of other laws impose minimum-wage obligations on entities that perform work for the federal government. For example, the DAVIS-BACON ACT (40 U.S.C.A. §§ 276a–276a–5) applies to contracts in excess of $2,000 to work on federal buildings or other

public works; the Walsh-Healey Act (41 U.S.C.A. §§ 35–45) applies to employers that provide materials, supplies, and equipment to the United States under contracts exceeding $10,000; and the Ser vice Contract Act (41 U.S.C.A. §§ 351–358) applies to contracts in excess of $2,500 to provide services to the federal government. These statutes all require contracting entities to pay workers the prevailing wage in the locality.

As of 2003, the federal minimum wage has remained at $5.15 per hour for non-exempt employees. However, in 11 states, particularly those in northwestern and northeastern parts of the United States, the state minimum wage is higher than that of the federal government. Under the FLSA, if a state's minimum wage is higher, then that rate applies to employees working in that state.

The following 11 states provide a higher minimum wage than the federal standard (with the applicable hourly rate in parentheses), according to information from the U.S. LABOR DEPARTMENT: California ($6.75); Oregon ($6.90); Washington ($7.01); Maine ($6.25); Vermont ($6.25); Massachusetts ($6.75); Delaware ($6.15); Connecticut ($7.10); Rhode Island ($6.15); Alaska ($7.15); and Hawaii ($6.25).

The law in a few states still provides a minimum wage that is lower than the federal rate, although the latter continues to apply. Rates in American Samoa are established by a special industry committee, which determines rates for particular industries, rather than all covered employees. Like the states, an employer in American Samoa may choose to set rates at a higher level than the standard set by the committee.