United States: Federal Wage Claims? That's The Easy Part!

Last Updated: March 5 2015
Article by Edward F. Harold

Retailers are all too familiar with collective actions filed under the Fair Labor Standards Act (FLSA) making claims for unpaid overtime based on alleged misclassification of employees as exempt, working off the clock, or not counting all hours worked. But complying with the FLSA is a relatively simple task when compared to complying with the myriad of different state wage and hour laws that impact everything from paydays to vacation time.

For example, in January, Petsmart announced that it was settling a class action under California law related to its use of pay cards to provide employees' final wages. The amount of the settlement was $1.1 million to a class of 1100 employees. According to the complaint, Petsmart's pay-card practice did not comply with California labor code's requirements for using pay cards for wages. Disney was also hit with a California class-action lawsuit alleging it improperly failed to pay terminated employees for unused vacation time.

While California probably has the greatest number of state law wage lawsuits, it is far from the only state to have various standards relating to the payment of wages. State laws may cover areas such as how often employees must be paid, limiting the length from the time of work to the time of payment, whether employees can be fined, when terminated employees must receive their wages, restrictions on the use of pay cards, and whether vacation must be paid.

Violations of state wage laws are accompanied by penalties and fines and the right to attorneys' fees. These can quickly turn a claim for a few hundred dollars for vacation pay into a claim for multiple thousands of dollars. Because most employers have standard practices, where those practices violate a state law, they violate it as to all the employees in the state. This can make class-action status an easy question.

Here are some areas to review prior to beginning operations in a new state.

How Much To Pay: Minimum wage and overtime

The first area many retailers will need to consider is whether or not states have minimum wage and overtime laws that are more generous than the FLSA. Currently, 29 states and the District of Columbia have a minimum wage higher than the federal minimum wage. The amounts range from $7.50 an hour (New Mexico) to $9.50 (Washington D.C.). Further complicating matters are the existence of even higher minimum wages in various municipalities. For example, San Francisco has approved a minimum-wage ordinance that will raise the minimum wage there to $15.00 an hour by 2018.

Some states also have laws that require overtime be calculated on a daily basis. For example, Alaska, California, and Nevada require overtime for nonexempt employees who work more than eight hours in single day. Rhode Island has a law specific to retailers requiring they pay their employees 1.5 times their regular rate of pay for hours worked on a Sunday or a holiday. It further requires that the employee must get a least four hours of work on these days.

How To Pay: Pay cards and direct deposit

Since the earliest days of the industrial age when employers paid employees with scrip redeemable only at the company store, states have been enacting laws to govern the method of payment. Most states have a law requiring that wages be paid by check or in U.S. currency.

But with the advent of electronic banking, paper checks and cash are not nearly so common. The first widely used non-paper method of payment was through direct deposit into an individual's bank account. While the vast majority of employees enjoy the convenience of this method, it was attacked because many low-wage earners were unable to qualify for a free checking account. As such, they were being charged monthly fees to be able to accept the direct deposit. In response, many states passed laws prohibiting employers from using direct deposit without the employee's consent.

The latest common method of payment is the pay card. These cards are not connected to a specific bank account and the employer can place the wages on the card. The employees access their wages through ATM machines. Critics of this method of payment observed that using ATM machines carries heavy fees leaving employees with less money than they had earned.

In response, several states passed laws governing the use of this method of payment. Most of these provide requirements such as the employee must be able to withdraw 100% of the funds on the card without a fee in one transaction (Illinois). Other limitations include that the employer cannot force an employee to accept payment on a pay card (Hawaii), that fees must be disclosed in advance (Maryland), or that there be no fees (New Jersey).

When To Pay: Frequency and timeliness of wage payment

How often employees are paid is regulated in many states. The most common regulation is to prohibit monthly pay periods and require that employees be paid at least twice a month. This can include requirements that the paydays be approximately 15 days apart.

Industries with heavy concentrations of nonexempt employees whose hours routinely fluctuate, such as retail, tend to pay in arrears. That is, it takes several days after the end of a pay period to properly calculate the wages owed and to issue payment. But state laws can limit the amount of time between these events.

Connecticut, for example, requires that the payday be no later than eight days following the close of the pay period. California requires regular wages for the first half of a month to be paid no later than the 26th of the month and wages for the second half of the month be paid no later than the 10th of the following month. Wages earned in excess of the normal work period must be paid by the next regular payday.

Final Wages: Payment upon termination

States vary significantly on requirements related to the final pay of an employee who has been terminated. Some are complex, such as Louisiana where different periods apply to employees who have resigned and those who have been discharged. Some states have very short time periods such as Alaska that requires a discharged employee be paid within three days of the date of discharge. These create the headache of manually issuing payment at times when payroll is not even being run.

Just as the timing of final wages differs among states, so too do the penalties for failing to pay in a timely manner. Some states have fines – and even jail time – for paying late. Penalties available to the employee who has not been paid range from triple the amount of the wages to 90 days wages. Laws usually include provisions for the prevailing employee to recover his attorneys' fees.

Laws regulating whether employees must be paid for unused vacation time also vary widely. Many states such as Mississippi defer to the employer's policy. Thus, if an employer's policy provides that unused vacation time is not paid out on termination, it will be upheld by the courts. But other states such as Arizona, include pay for unused vacation as an amount due upon termination of employment.

Summing It Up

The above examples are but a few of the many wage topics regulated by state law. Other areas that might come into play would include wage forfeiture, fines, treatment of sick leave upon termination, wage statements, and impermissible deductions. The key to compliance is knowledge. A company cannot assume that because it complies with the FLSA it is in compliance with the wage laws of the states in which it operates.

In the Internet age, educating yourself on state wage laws is not difficult. The websites of states' departments of labor often have publications explaining the state's particular rules. Likewise, state statutes are available for free online. The Fisher & Phillips website has links to many state-specific law guides that include explanations of the wage laws in those states. Spending some time understanding these laws before moving operations into a new state is significantly less costly than the wage lawsuits that will follow innocent failures.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Edward F. Harold
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.