A look at labour standards south of the border

The United States is our closest neighbour and largest trading partner. American movies, TV and music permeate our culture; we have a lot in common with Americans. Yet, our two countries are not identical — especially when it comes to issues around labour standards.

Requirements for minimum wage, overtime pay, paid vacations, statutory holidays and unpaid leaves are, in many cases, different from our rules. Here is a brief look at how U.S. law treats these key labour standards issues:

The FLSA is a federal government act that sets out minimum wage and overtime pay rules (as well as rules for keeping records and employing children) for full- and part-time workers in the private sector and in federal, state and local governments. It covers most employees in the United States regardless of the state in which they work.

The act exempts some employees from its minimum wage or overtime requirements. For example, executive, administrative and professional employees are exempted from both minimum wage and overtime standards, depending on the type of work they do and their salary level. Certain commission-based employees who work in retail businesses are covered under the minimum wage requirements, but are exempt from overtime pay. (For a full listing of exemptions, contact the U.S. Department of Labor.)

In addition to the FLSA, most states have their own minimum wage, overtime and child labour laws that closely reflect the FLSA. State laws that are more lenient than the FLSA apply only to employers and employees not covered by the federal law. If a state law is stricter than the federal law, all employers and employees in the state, even those covered by the FLSA, are covered by the state law unless they are specifically exempted.

The rules for paying minimum wage in the United States differ from those in Canada, where each province and territory sets its own minimum wage rate without requirements from the federal government. In the United States, all employers covered by the FLSA are required to pay at least the national minimum hourly wage rate of $7.25 (all

figures in US dollars) to all employees who are not exempted from the act.

There are exceptions to the $7.25 requirement. For instance, employers may pay new hires who are under 20 years old $4.25 per hour for their first 90 calendar days of employment.

Employers that pay tips may credit the tips against their minimum wage obligations to employees who work in jobs in which they customarily and regularly receive more than $30 a month in tips.

Employers may pay these employees as little as $2.13 per hour and still comply with the law. However, employers must make up any difference between the minimum wage and the combination of $2.13 plus tips to ensure each employee makes at least the minimum wage.

Most states have set their own minimum wage rates. If the rate is higher than the federal rate, it will apply. If it is lower (or there is no minimum wage rate), the federal rate will apply for employees covered by the FLSA. There are no state minimum wage provisions in Alabama, Louisiana, Mississippi, South Carolina or Tennessee.

Currently, a higher minimum wage rate applies in 23 states plus the District of Columbia ($9.50). The highest state rates are in Washington ($9.32), Oregon ($9.10) and California ($9.00).

Minimum wage rates have received a lot of attention in the United States this year. President Barack Obama has pushed for increasing the national minimum wage rate to $10.10 per hour. He has so far been unable to convince Congress to do this, but some states plan to raise their minimum wage to at least that amount over the next few years.

Connecticut plans to have a minimum wage of $10.10 by 2017, with increases phased in beginning in January. Hawaii and Maryland will also phase in minimum wage changes, with the rates set to reach $10.10 per hour by 2018.

The District of Columbia is phasing in an $11.50 per hour rate by July 1, 2016, and will eventually index its minimum wage rate.

At the end of June, the governor of Massachusetts signed a law to raise the state’s minimum wage rate by $3 over the next three years to $11 per hour.

Minimum wage rates are also going up in other states, although not as high as Obama’s desired $10.10. Delaware, Michigan, Minnesota, Rhode Island, Vermont and West Virginia have announced wage hikes to occur over the next four years.

Illinois is considering holding a referendum on its minimum wage rate in November, asking voters if the state’s minimum wage should rise from $8.25 per hour to $10.00 by Jan. 1, 2015.

Some American cities have also implemented minimum wage laws. In June, Seattle’s city government voted to phase in a minimum wage increase from $9.32 per hour to $15, beginning next April. San Francisco is also considering a $15-per-hour minimum wage and politicians in Chicago are discussing raising the rate there from $8.25 to $13 by 2018.

Overtime requirements under the FLSA are based on weekly hours worked, not daily hours. Employers have to pay overtime after an employee covered by the act has worked 40 hours in a workweek, unless the employee is exempt from the requirement. There is no limit on the number of hours an employee who is at least 16 years old can work in a week.

The overtime pay rate is 1.5 times the employee’s regular rate. The regular rate is not necessarily the basic rate to which the employer and the employee may have agreed. To determine the regular rate of pay, employers have to add certain supplemental payments they made to the employee (such as non-discretionary bonuses, shift differentials and incentives) to the employee’s pay and then divide the total by the number of hours the employee worked.

Most states follow the federal requirements for overtime; however, a few states also have daily overtime requirements, including Alaska, California, Colorado and Nevada.

As with minimum wage, there are many states that do not have their own overtime provisions, such as Alabama, Arizona, Delaware, Idaho, Iowa, Louisiana, Mississippi, Nebraska, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, and Wyoming. In these states, the federal overtime rules apply for workers covered under the FLSA.

There are no rules under the FLSA requiring employers to provide employees with a minimum amount of paid vacation time per year or to pay them for taking the day off work on a statutory holiday. It is up to employers to decide whether to provide paid time off. In some cases, paid time off is part of a collective agreement or employment contract.

A report on international standards for paid vacation and paid holidays, released last year by the U.S.-based Center for Economic and Policy Research, found that one in four Americans do not receive any paid vacations or paid holidays.

“The United States is the only advanced economy in the world that does not guarantee its workers paid vacation days and paid holidays,” said John Schmitt, senior economist with the centre and one of the report’s authors.

Despite the lack of legal requirements to do so, many employers in the United States do provide paid time off for employees. The report cites U.S. government survey data showing the average private sector employee has about 10 days of paid vacation time and about six paid holidays each year.

The data also shows that only 49 per cent of low-wage workers in the U.S. have paid vacation time, compared with 90 per cent of high-income earners. In addition, paid vacations were much more common for full-time workers (91 per cent) than part-time workers (35 per cent).

The federal Family and Medical Leave Act (FMLA) requires certain employers to provide up to 12 weeks of unpaid leave to an eligible employee in the event of: a birth, adoption or foster care placement where the employee is the parent; or a serious health condition involving the employee or the employee’s spouse, child or parent.

The FMLA applies to all employers that employ 50 employees within a 75-mile (about 121 km) radius for at least 20 weeks in the current or preceding calendar year. To be eligible for a leave, an employee must have 12 months of service and at least 1,250 hours of work during the previous 12 months.

Some states have enacted their own laws around unpaid leaves. If a state’s law provides greater family or medical leave rights than the FMLA, the state law will apply.

The FMLA also allows for a 26-week unpaid military caregiver leave. Employees who are the spouse, son, daughter, parent or next of kin of a member of the Armed Forces may take the leave to provide care to the service member if the person suffers a serious injury or illness. The time off is limited to a single 12-month period.

As with laws in Canada, there are many exceptions and exemptions that apply to the FLSA, FMLA and to various state laws. Payroll practitioners in Canada who are responsible for U.S. payrolls should refer to the U.S. Department of Labor’s website (www.dol.gov), as well as to the labour department in the state in which the employees work to ensure they are complying with the rules there.