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10 Areas State and Local laws May Be Stricter than Federal Law

10/01/18

Author: ADP Admin/Tuesday, September 25, 2018/Categories: Bulletin News

While there are a host of federal laws and regulations with which employers must comply, many state and local jurisdictions have similar laws, some of which offer greater employee protections. Understanding which laws apply to your business can be a significant challenge. To help, we've identified 10 areas in which your state and/or local law may have stricter rules.

#1: Minimum wage.
Under the federal Fair Labor Standards Act (FLSA), employers must pay non-exempt employees a minimum wage of at least $7.25 per hour. However, several states and local jurisdictions have higher minimum wages. If an employee is subject to more than one minimum wage requirement, you must generally comply with the rate most generous to the employee. For example, if your state minimum wage is $10.00 and the local minimum wage is $11.00, you must generally pay the employee at least $11.00 per hour, since it is higher than the state and federal minimum wage rates. Additionally, if your business is located in one state, but you have employees (such as remote workers) working in another jurisdiction, the minimum wage in the location where the employee performs work generally applies. Check your state and local law for details.

#2: Overtime.
The FLSA requires employers to pay non-exempt employees 1.5 times their regular rate of pay for all hours worked over 40 in a workweek. Some states require overtime pay in additional circumstances and at different rates. For example, California requires employers to pay non-exempt employees 1.5 times their regular rate of pay for hours worked over eight in a workday and over 40 hours in a workweek, and for the first eight hours of work performed on the seventh consecutive work day in a single workweek. California also requires double pay for all hours worked over 12 in a workday, and over eight on the seventh consecutive workday in a workweek. Check your state law to ensure compliance.

#3: Exemptions from overtime.
Under the FLSA, to be classified as exempt from overtime, the employee must generally:
  • Meet the minimum salary requirement (currently $455 under the FLSA);
  • Receive their full salary in any week they perform work, regardless of the quality or quantity of the work;
and
  • The employee's primary duties must meet certain criteria.
Some states have enacted their own tests for exemption. For example, some require higher salaries to be classified as exempt and/or have stricter duties tests. Before classifying an employee as exempt from overtime, make sure they satisfy all applicable tests.

#4: Meal periods and rest breaks.
Under federal law, there is no requirement for employers to provide meal periods or rest breaks, but there are rules for employers that do offer them. For example, the FLSA generally requires rest breaks (defined as any period lasting 20 minutes or less) to be paid.

Meal periods generally must be paid unless:
  • They are at least 30 minutes in duration without interruption; and
  • The employee is fully relieved of all duties for the purpose of eating regular meals.
Many states, however, require employers to provide meal periods and/or rest breaks and have stricter rules on when and how they must be provided. Check your state law for additional guidance.

#5: Independent contractors.
Strict federal and state tests must be satisfied for an individual to be considered an independent contractor. The most commonly used federal test is the Internal Revenue Service (IRS) Common Law Test, under which various factors are considered and the unique circumstances of each case are weighed and balanced. Some states have adopted stricter tests, such as the ABC test, which is generally a more difficult test to satisfy since all three factors must be met. Make sure an individual satisfies all applicable federal and state tests before classifying them as an independent contractor.

#6: Deductions.
Under the FLSA, employers may make deductions from non-exempt employees' pay for uniforms, tools, and equipment, provided the deduction doesn't reduce their pay below the minimum wage or cut into overtime pay. By contrast, some states require employers to pay the full cost of required uniforms, tools, and equipment. However, some states make exceptions for certain types of tools or equipment, such as tools and equipment customarily required by the employee's trade. Check your state law for more information.

Note: Employers are prohibited from making deductions from exempt employees' salaries for uniforms, tools, and equipment.

#7: Equal employment opportunity.
Federal nondiscrimination laws prohibit discrimination on the basis of sex, age (40 or older), disability, race, color, religion, genetic information, pregnancy, and national origin. Many states and local jurisdictions have enacted their own nondiscrimination laws that offer greater protections for workers, such as for gender identity or sexual orientation discrimination, and/or cover smaller employers. Make sure you understand and comply with all of the nondiscrimination laws that apply to your employees.

#8: Sick leave and vacation.
Federal law generally doesn't require private employers to offer paid sick leave to employees, but several state and local jurisdictions do. While no (federal, state, or local) law requires employers to offer vacation to employees, employers that do offer it may be subject to certain rules. For example, several states explicitly prohibit policies that force employees to forfeit unused vacation or paid time off (also known as use-it-or-lose-it policies). In these states, employers must generally pay employees for accrued, unused vacation at the time of separation and/or may require carry over of unused time from year to year.

#9: Application and interview questions. Many jurisdictions have enacted laws that restrict employers from asking an applicant about his/her criminal background on application forms. Some go even further, restricting these types of questions until after the employer makes a conditional job offer. These restrictions are often referred to as "ban the box" laws. Separately, a number of jurisdictions have enacted laws that generally prohibit employers from asking about an applicant's salary history and/or basing pay decisions on pay history.

Note: While there is no federal law specifically prohibiting employers from asking applicants if they've ever been convicted of a crime, the Equal Employment Opportunity Commission (EEOC) recommends employers avoid asking for this information on an application form. If and when employers do ask about convictions later in the selection process, the inquiries should be job related and consistent with business necessity.

#10: Final pay.
Under federal law, final pay is generally due by the next regular payday, but many states require final pay sooner. In some states, this timeframe differs depending on whether the employee initiates separation (voluntary termination) or the employer initiates separation (involuntary termination). For example, California requires final pay immediately for involuntary terminations. For voluntary terminations, the state requires final pay within 72 hours. However, if the employee provides at least 72 hours of notice, final pay is due on the employee's last day. Keep in mind that depending on your state and policy, you may be required to include any accrued, unused vacation/paid time off in final pay.

Conclusion:
These are just some of the areas in which state and local law can differ from federal law. Typically, where these laws conflict, the law most generous to the employee applies. Make sure you understand which laws apply to your employees and implement policies and practices accordingly.

This content provides practical information concerning the subject matter covered and is provided with the understanding that ADP is not rendering legal advice.

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