WAGE AND HOUR UPDATE

By Edward W. Bergmann

FLSA MINIMUM WAGE AMENDMENTS TAKE EFFECT ON APRIL 1

Effective April 1, 1990 the federal minimum wage will increase from $3.35 per hour to $3.80 per hour (with an additional increase to $4.25 per hour effective April 1, 1991) under the provisions of the Fair Labor Standards Amendments of 1989. Additional minimum wage amendments to the Fair Labor Standards Act are reviewed below.

Amended Enterprise Coverage for Minimum Wage Purposes
The dollar value test for enterprise coverage has been raised from $250,000 ($362,500 for retail firms) to $500,000. Employees of firms that have an annual volume of business of less than $500,000 are covered by the FLSA in any workweek in which they are individually engaged in commerce, the production of goods for commerce, or in a closely related activity.

Construction and laundry/dry cleaning enterprises, which previously were subject to enterprise coverage irrespective of their annual dollar value of business, become subject to the $500,000 test under the Fair Labor Standards Amendments of 1989. Hospitals, schools, and public agencies continue to be subject to enterprise coverage without regard to their volume of business.

Repeal of the Retail Exemption
The minimum wage and overtime pay exemptions for small retail establishments have been repealed. Thus, employees of such establishments become subject to minimum wage and overtime pay requirements in so far as they are individually engaged in commerce or in the production of goods for commerce in a workweek.

Grandfather Clause
Any enterprise that ceases to be covered by virtue of the increase in the enterprise coverage dollar value test must continue to pay its employees not less than $3.35 per hour, and continues to be subject to the overtime pay and child labor provisions of the FLSA.

Tip Credit Increases
Employers can take a tip credit of up to 40 percent of the minimum wage for certain tipped employees. This credit increases to 45 percent on April 1, 1990 and to 50 percent on April 1, 1991.

Remedial Education Provision for 40 + Hour Workweeks
Employers may employ employees who lack a high school diploma, or who have not attained educational level of the eighth grade, for up to ten hours over forty in a workweek without paying overtime if the employees are provided with remedial reading or other basic skills during such hours. The training provided, however, must not be job specific under this provision.

The New Training Wage and Its Restrictions
Relative to job specific training, under certain conditions employers may pay employees age 16 through 19 a wage rate of at least 85 percent of the minimum wage but not less than $3.35 per hour for up to ninety days. An employee who has been paid at this subminimum training wage for ninety days can be employed for ninety additional days by a different employer, if that employer provides job training in accordance with the rules to be issued by the Department of Labor.

The training wage provision, which expires on March 31, 1993, includes the following restrictions. Employers are prohibited from displacing regular employees in order to hire employees eligible for the subminimum training wage. Also, only a maximum of one- fourth of the total of all the establishment's employees monthly hours can be paid at the subminimum rate.

Impact of Changes on Illinois Park Districts
Where state minimum wage laws impose requirements greater than the federal law, including the above- mentioned Fair Labor Standard Amendments of 1989's requirements, state law takes precedent. Thus, since The Illinois Minimum Wage Law has more stringent requirements in a number of areas, that law will control. These areas are as follows:

A. In Illinois subminimum wage rates only apply to employees under age 18 and the tip credit remains at 40 percent. Thus, Illinois Park Districts will not be able to hire 18 and 19 year old workers at subminimum wages. They will also have to continue to apply the 40 percent tip credit in restaurant operations.

B. Since Illinois only recognizes the organized camp exception to the minimum wage requirement, park districts will have to pay minimum wages to other recreational and amusement establishment employees. Illinois has adopted the federal minimum wage levels except for the differences to teenagers discussed above.

Edward W. Bergmann
SEYFARTH, SHAW, FAIRWEATHER & GERALDSON
55 E. Monroe Street
Suite 4200
Chicago, Illinois 60603
(312) 346-8000

February, 1990