Do I follow state or federal minimum wage requirements?

Oct 9

As a business owner, you are required to follow both federal and state minimum wage laws, but here's how it works in practice:

Federal Minimum Wage

The federal minimum wage is set by the Fair Labor Standards Act (FLSA). As of 2024, the federal minimum wage is $7.25 per hour for non-exempt employees. All employers across the U.S. must pay at least this amount, unless a higher state or local minimum wage applies.

State and Local Minimum Wage

Many states and cities have established their own minimum wage laws, which are often higher than the federal minimum wage. If the state or local minimum wage is higher than the federal rate, you must pay the higher wage. Some states also adjust their minimum wage rates annually based on inflation or cost of living increases.

In addition to state laws, certain cities and counties may also have their own minimum wage rates, which could be even higher than both the federal and state rates. If your business operates in such an area, you are required to pay the local minimum wage.

For example:

In California, the state minimum wage is significantly higher than the federal minimum, and employers are required to follow the state’s minimum wage law.
In Texas, where the state minimum wage is set at the federal rate of $7.25 per hour, employers only need to follow the federal law unless local jurisdictions set a higher rate.
In Seattle, WA, the local minimum wage is higher than the state and federal minimum wage, and employers with employees working in this area are required to pay the local minimum wage.

Which to Follow:

If your state’s minimum wage is higher than the federal minimum wage, you are required to pay the higher state wage.
If your state’s minimum wage is not indicated then it is equal to the federal minimum wage, you must pay at least the federal rate of $7.25 per hour.

Exceptions:

Some workers may be exempt from minimum wage laws (e.g., tipped employees, interns, apprentices) or may have a different minimum wage requirement.
The Fair Labor Standards Act (FLSA) also allows for a reduced "youth minimum wage" of $4.25 per hour for employees under 20 during their first 90 days of employment. Again, check your state and local minimum wage requirements as well.

Key Takeaway:

You must comply with the highest minimum wage requirement that applies to your business, whether it's federal, state, or local. Always check both your state and local laws to ensure you're meeting the correct wage standards.

This Q&A does not constitute legal, accounting, or tax advice and

does not address state or local law.

April Salsbury

April Salsbury, MBA is a strategist, an analyst, an operational guru, a recognized leader and C-suite global healthcare executive with drive and focus for competitive markets. Co-host of The Business Forum Show and regular contributor to various business journals, she possess multi-functional and multi-national competencies with more than 15 years experience in business and healthcare. Her expertise is in invigorating revenue growth and infusing value of lean practices in growing companies through improvements to cash flow and operations management.