In 1938, led by President Franklin D. Roosevelt, the United States government passed the Fair Labor Standards Act. The FLSA introduced the standard working regulations for employees. Among other regulations, the FLSA introduced the first national minimum wage rate. The minimum wage at the time was $0.25 per hour.1 Before you gawk at what seems to be an insanely low hourly rate, consider the buying power it had.
When adjusted for inflation, that $0.25 would be equivalent to $4.07 per hour, today. This actually isn’t too far off of the $7.25 per hour rate of 2012.2 In case you were wondering, the lowest buying power of minimum wage was in 1948 when it was worth $3.81. Minimum wage had its highest buying power in 1968 when it was worth about $10.56.
So, what’s with the history lesson? Well, the minimum wage rate has long been a topic of contention, and it’s changing again. The Fair Minimum Wage Act of 2013 is being proposed as an amendment to the original Fair Labor Standards Act of 1938. The act recommends increases to the federal minimum wage for employees to: (1) $8.20 an hour on the first day of the third month after the enactment of this Act; (2) $9.15 an hour after one year; (3) $10.10 an hour after two years; and (4) the amount determined by the Secretary of Labor (based on increases in the Consumer Price Index) after three years, and annually thereafter.3
In compliance with a 2006 state law, Ohio recently experienced a jump in minimum wage rate, when it increased 10 cents to $7.95 on January 1, 2014. For employers, this unfortunately means an increased payroll. Of course, some business owners have tried to skirt their way around the new labor laws in attempts save on payroll. We would like to remind you that compliance with minimum wages laws is necessary. Your business can be heavily fined and even end up in an ugly legal battle.
One way that employers are trying to avoid federal wage regulations is by what’s being called, “misclassification.” This is the misclassification of employees as something other than employees, such as independent contractors. Misclassified employees are denied access to critical benefits such as medical leave, overtime, minimum wage and unemployment insurance.4
The U.S. Department of Labor is taking employment misclassification seriously. It has deployed its own team of investigators to make sure businesses are in compliance of the Fair Labor Standard Act. Last November, Nightingale Home Support & Care of Mentor, Ohio was found in violation of the FLSA’s minimum wage, overtime and record keeping provisions. The company also misclassified some of its workers as independent contractors instead of employees. Nightingale Home Support & Care must now pay considerable damages to 15 of its employees.5
A business attorney can make sure you company is in compliance with the FLSA and its new Fair Minimum Wage Act of 2013 amendment.