Posted on 14-Sep-09 by The Timekeeper

OK, so maybe the headline is a little over the top, but seriously. When there’s a conflict between state and federal wage and hour rules, which one “rules”?

Turns out, there are probably more instances than you might think when the federal rules and the state rules are out of sync — which can be a puzzle for employers trying to do the right thing. How do you decide what the right thing is when you’re getting two different stories, one from the state and one from DC?

When is minimum wage not the minimum?

From the Zanesville Times Recorder comes the story of Angels Learning Centers, which is reportedly learning the hard way how those conflicts are solved. Following an investigation, the Attorney General of the state of Ohio recently filed a lawsuit seeking back pay of over $408,000 plus $817,000 in damages for the company’s 150 employees. The company stands accused of not paying their employees the correct minimum wage. (And they seem to have compounded the problem by not paying up or filing a “satisfactory response” — trying to “stonewall” the investigators is another issue I’ve talked about before.)

ANYway, seems in Ohio, there’s a higher state minimum wage ($7.30 an hour) than the one mandated at the federal level (currently $7.25 an hour). So which one should the employer have used?

Now, normally, the rule is that whichever rule is more to the benefit of the employee is the one employers have to follow. I can see the logic of this. While there are exceptions for employees who have skills that are in extreme demand where the employee might wield more than typical power in the employment transaction, in most cases the employer holds most of the cards. For instance, if an employee — especially the low-wage employees for whom minimum wage laws would be applicable — quits or is fired, they can usually be fairly easily replaced — presumably by someone who will be less likely to complain about wage and hour violations.

So in most cases the law says, since the employer already has a built-in advantage, whenever there’s a conflict between the federal and the state law, the law that’s more beneficial to the employee applies.

Minimum wage, with a twist

In this particular case, the legislature in Ohio has seen fit to add a tiny twist or two to the equation. While there is a higher state minimum wage, it only applies to companies that gross over $267K a year. Those that gross less simply follow the federal minimum wage. And the state minimum wage will get adjusted every January 1 to account for inflation, based on the Consumer Price Index.

Now, I don’t know what the annual gross income of the Angels Learning Centers might be, but I’m guessing it was probably enough to kick in the higher state minimum wage. And this is likely where the problem arose. I don’t know the specifics of what they were supposedly paying people, but, if they were — just as a for instance — paying the federal minimum wage of $7.25 an hour, but the company was grossing more than $267K annually, they should have been paying at least $7.30 an hour.

And if they weren’t even paying the federal minimum, well, shame on them.

So what have we learned?

First, it’s a good idea to check with your employment law attorney to make sure you (and if you use one, your payroll processing service) are set up to compensate your employees correctly according to both federal and state laws. Even if you’re following one set of laws to the letter, being out of compliance with the other can still come back to bite you, big time.

Second, when there’s a conflict, whichever law is better for the employee generally wins.

And finally, whether you’re in the right or the wrong, stonewalling the investigators is usually a losing tactic.

So what do you think? When there’s a conflict between the feds and the state, how should that conflict be resolved?

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