The Fair Labor Standards Act of 1938 introduced the minimum wage to American business. Its purpose was to protect workers from market forces that would drive the income of the lowest paid workers below a fair and decent level.
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From the beginning, minimum wage standards have caused no small amount of frustration for small business owners. On the one hand, small business owners truly value their employees and want to pay them as much they are able to ensure the financial well-being of them and their families.
On the other hand, small business owners are at the mercy of market forces which dictate how much they can reasonably afford for labor. The enforcement of minimum wage standards, it is argued, creates an artificial burden on businesses, a burden that cannot be supported the market.
Furthermore, small business owners have made the case that they are unfairly impacted by minimum wage standards for the simple fact that they are less able to absorb the cost of increases in minimum wage than their larger, corporate counterparts.
The result has put small business owners between a rock and a hard place. By protesting against the minimum wage they run the risk of appearing cold, callous, and greedy. However, by not speaking out against it they run the risk of incurring labor costs that their business just cannot support.
Even so, small businesses can find some relief from minimum wage requirements. The Fair Labor Standards Act stipulates that small businesses with annual sales less than $500,000 may be exempt from paying the federally-dictated minimum wage to their employees.
However, you may still not be out of the woods if your state has its own minimum wage requirements. For example, the current federal minimum wage is $7.25 per hour. But, the California minimum wage is $8.00 per hour. If you own a business in California, you will be required to pay the higher rate of $8.00 per hour to your employees.
Food service businesses may be exempt from federal minimum wage standards for employees who receive tips, although this exemption depends on the amount of tips the employee receives. Likewise, you may be exempt from paying minimum wage for overtime or for younger employees who are under the age of eighteen.
Like it or not, you are going to have to comply with the minimum wage requirement. Failure to comply can result in fines and other penalties that you simply cannot afford to incur in your business.
But, knowledge is power. Your best course of action is to talk to your local Chamber of Commerce about the minimum wage requirements for your state and municipality, and to research which employees (if any) might be exempt from the requirements.
The Chamber of Commerce may also be able to put you in touch with legislators to discuss how the minimum wage affects your business. Although this won't help you now, it might have an impact on future minimum wage legislation.