Many small businesses will, at some point, hire at least one employee. Employees are necessary for any successful business but they also present many unique and, often, substantial risks. One of those risks is compliance with wage and hour laws including the requirement to pay at least a minimum wage. In Washington, the minimum wage is governed by the Minimum Wage Act (MWA) in RCW 49.46.
On the surface, paying a minimum wage seems simple enough: just multiply the hours worked by the minimum wage to calculate pay. And, while that may be the basic rule, there are many complications, restrictions and exemptions. A full and complete summary of all of the intracacies of the MWA is beyond the scope of this article; however, we highlight some areas of the rule and provide you with links and resources for further study and consideration.
To begin with, you must determine which minimum wage applies. The federal government has a minimum wage and most states have their own minimum wage law. In the case where a state has a higher minimum wage, the state law will apply. The federal minimum wage (at this time in February of 2015) is $7.25 (click here to check the current federal minimum wage) but Washington has a much higher minimum wage (the highest in the nation) at $9.47 but adjusts every so often so always make sure to check the current rate. You can check here for the Washington rate.
If you are an employer in Washington, you are required to pay your employees at least the state minimum wage. If you have employees in multiple states, you would apply the minimum wage in the state where the employment occurs. If the employee works in multiple states during a pay period, it gets even more complicated. As mentioned above, it’s much more complicated than it appears on its face and we are just getting started!
After determining which minimum wage applies, you must determine which employees are subject to the minimum wage because not all employees fall under the rule. An “employee” under the MMA is every employee that is not otherwise excluded by the law. The exclusions are listed in RCW 49.46.010(3)(a) through (n) and include such employees as prison inmates, seamen working on boats and lawyers. There are many exemptions so carefully review them and make sure that they apply. I often work with clients that just assume an employee is exempt but never completed the analysis to confirm the applicability. This is not an area of the law where you should just make an assumption.
The problem with the MWA for employers is that there is little margin for error. If you make a mistake, an employee can make a claim against the employer and seek recovery of lost wages and penalties. Every business owner should invest in learning the MWA and make sure that every employee is properly classified.
This is a good summary of the MWA published by the Washington Department of Labor and Industries.
L&I itself is a good source of information. Their employer website is helpful and you can also call them for help.
I would also recommend that businesses of all sizes use a professional payroll service. These services can sometimes provide resources to help employers comply with the applicable laws.
In future articles, we will discuss the overtime rules and other wage and hour rules.