Labor Logic

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John D. Finerty, Jr.

The federal and state governments regulate the minimum amount of compensation employers can pay employees. Currently, the federal and state minimum wage rates are the same — $5.15 per hour. A council appointed by Governor Doyle is studying whether to raise the state’s minimum wage. A proposal to increase the state’s minimum wage rate is expected this spring.

Minimum Wage Rate Requirements

Chapter 104 of the statutes and DWD § 272.001 through 272.14 of the Wisconsin Administrative Code set forth the minimum compensation requirements under state law. The current minimum wage is $5.15 per hour for a permanent adult employee. Employees under 20 years old who have been employed for less than 90 consecutive days are known as opportunity employees; that category of employee may be paid $4.25 per hour. There are lower rates for employees who receive tips as a portion of their income, as well as for agricultural employees and golf caddies. Wisconsin’s minimum wage rates have not changed since 1997.

The federal Fair Labor Standards Act, found at 29 U.S.C. § 201 et seq., applies to employers with $500,000 or more in annual gross sales. Employers with less than $500,000 in sales, however, may also be covered if they engage in interstate commerce, such as transporting goods across state lines, mailing, packaging or otherwise handling goods for mail or delivery across state lines or make telephone solicitations across state lines. Employers covered by both federal and state law must pay the higher of the two minimum wage rates.

Study Panel

Governor Doyle convened a 17-member study panel last year to prepare a proposal to raise Wisconsin’s minimum wage. The council met for the first time last week.

Micabil Diaz-Martinez is the counsel’s Chairman; Diaz-Martinez also serves as division administrator for the Department of Workforce Development. The minimum wage increase, if adopted by the legislature and signed into law by the Governor would effect about 130,000 workers, according to the DWD.

Alternatives for Employers

Employers do not have to pay employees by the hour. That is, employers may pay employees a salary, commission or a piece-rate, provided the total amount paid the employee, divided by the number of hours worked, is equal to or greater than the minimum wage. A non-exempt salary arrangement may be particularly useful when employees’ hours change on a week-to-week basis. A common practice is to set employees’ salaries and divide by 37.5 hours per week; any hours worked over 40 per week would have to be approved in advance. This advanced overtime approval requirement protects employers in the event an employee works beyond 40 hours in a week that causes the average weekly wage to fall below the minimum requirements.

Another alternative includes hiring independent contractors. Minimum wage and overtime standards apply only to employees. Independent contractor relationships, however, are risky. Unless a company is truly outsourcing a particular job function, a former employee hired as an independent contractor to perform his or her previous job duties may actually be an employee disguised as an independent contractor. Liability for wrongly treating an employee as an independent contractor includes tax liability for withholding, potential worker’s compensation and unemployment insurance liability, as well as backpay for minimum wage or overtime payments.

For more information on classifying employees or developing employment policies to address these issues, contact John D. Finerty, Jr. at Michael Best & Friedrich at (414) 225-8269 or on the Internet at [email protected].