When Can You Pay Less Than Minimum Wage?

Under federal law an employer may pay newly hired employees under the age of 20 less than minimum wage, but no less than $4.25 per hour, but only for the first 90 consecutive calendar days of employment. Increases in the minimum wage rate apparently do not affect this rate, the statute specifies that it shall be $4.25 and makes no mention of any increases relative to the federal minimum wage rate.

If an employer hires a new employee and pays less than minimum wage, under federal law the employer is prohibited from reducing the hours of a current employee or to reduce the pay of a current employee. The employer cannot replace an existing employee with a new employee earning less than minimum wage.

Federal law also allows employers to pay only 75% of the federal minimum wage to learners, apprentices and students. To pay less than minimum wage under these programs the employer is required to obtain a certificate from the wage and hour division. The certificate will specify the rate the employer is allowed to pay. A learner is an individual that has not worked a specified number of hours for that particular industry in the last three years and that worker can be employed at less than minimum wage. This applies only to certain industries and it does not include clerical or office jobs. A student is one enrolled in an accredited school and working on a part time basis as part of a vocational training program. The student is not allowed to spend more than 40 hours per week in combination of class instruction and work. If the student is a minor the employer has to comply with statutes applying to minors.

An apprentice is an employee that is at least 16 years old and as part of the job is employed to learn a skilled trade that is within the guidelines set under 29 CFR § 520.201.

Full time students employed by the school or agriculture or in retail services can be paid 85% of the minimum wage, but a certificate is also specifying the rate the employer may pay. Students are not allowed to work more than 20 hours per week except during vacation from school. It is as retail business the total number of hours paid at less than minimum wage should not exceed 10% of the total hours worked by all employees.

Under federal law employers are also allowed to pay disabled individuals less than minimum wage, but a certificate is also required. Each state may enact its own statutes, but they cannot offer less protection. Under California law employers are permitted to pay less than minimum wage, but the California minimum wage rate is much higher than federal law.

In California learners can be paid less than the minimum wage rate for the first 160 hours only. Learners’ wages and learners are defined differently under California law. For the purposes of California learners wage laws, a learner is a defined as natural person that is an employee and has no previous experience or no similar experience. The learners pay rate is no less than 85% of the minimum wage rate and it rounded to the nearest nickel.

California also allows for payment of less than minimum wage for minors. A minor can be paid no less than 85% of the minimum wage rate rounded to the nearest nickel, and the employer is not allowed to have more than 25% of the total hours allocated to less than minimum wage rate minors. If the employer is a small business with less than 10 employees then the most minors allowed is three at less than minimum wage. These standards like federal law don’t apply during vacation periods.

There is an exception for minors graduating high school; these minors that have graduated high school must be paid the minimum wage rate. Generally California minimum wage is higher than federal minimum wage rates, and 85% of the state minimum wage will often exceed the federal minimum wage rate, but employers employing minors need to careful that 85% of the state minimum wage rate does not fall below the federal minimum wage rate as there is no exception for minors under federal law. Under California law the employer or employee is required to obtain a license from the California Division of Labor Standards Enforcement to employ the handicapped and pay less than minimum wage.

Note that minimum wage rules are subject to change and can and do change without notice.