Minimum Wage
What does "Minimum Wage" mean in law?
Minimum wage is the lowest hourly compensation that employers are legally required to pay covered employees under the Fair Labor Standards Act and applicable state laws. The constitutionality of minimum wage legislation was initially rejected in Adkins v. Children's Hospital, which held that such laws violated the liberty of contract under the Fifth Amendment's Due Process Clause. That holding was overruled by West Coast Hotel Co. v. Parrish in 1937, establishing the constitutional foundation for the FLSA's minimum wage provisions enacted the following year. Where state minimum wage laws set a higher rate than the federal floor, the higher rate applies; employers must also account for tipped employees, who may be paid a lower cash wage provided tips bring total compensation to the minimum wage level.
Definition
Minimum wage is the lowest hourly compensation that employers are legally required to pay covered employees under the Fair Labor Standards Act and applicable state laws. The constitutionality of minimum wage legislation was initially rejected in Adkins v. Children's Hospital, which held that such laws violated the liberty of contract under the Fifth Amendment's Due Process Clause. That holding was overruled by West Coast Hotel Co. v. Parrish in 1937, establishing the constitutional foundation for the FLSA's minimum wage provisions enacted the following year. Where state minimum wage laws set a higher rate than the federal floor, the higher rate applies; employers must also account for tipped employees, who may be paid a lower cash wage provided tips bring total compensation to the minimum wage level.
Example
A restaurant that pays servers only $2.13 per hour in cash wages must ensure that tips bring each server's total hourly compensation to at least the federal minimum wage, or make up the difference.