North Dakota has maintained the federal minimum wage since the Fair Labor Standards Act (FLSA) was established in 1938. The state has never set a separate, higher minimum wage rate. Despite this fact, there are still a number of important considerations for employers operating within the state. Understanding the nuances of the North Dakota minimum wage, including provisions for tipped employees and young workers, is crucial to ensure fair labor practices and compliance with both federal and state laws.
Read on to find out everything you need to know about the North Dakota minimum wage to ensure your business is operating fairly and in compliance with the law.
North Dakota Minimum Wage: Current Rates
North Dakota is one of the few states that has not adopted its own state minimum wage law, which means it adheres to the federal minimum wage of $7.25 per hour for untipped workers, as defined by the Fair Labor Standards Act (FLSA). This federal minimum wage has remained unchanged since its last update in 2009 (when it was raised from $5.15 per hour). Under the federal Act, employers in North Dakota must pay eligible employees at least this rate for all hours worked. They must also pay employees covered by the FLSA 1.5 times their regular rate of pay for any hours worked over 40 in a workweek.
In terms of the minimum wage rate for untipped workers, North Dakota has established a higher tipped minimum wage of $4.86 per hour (the federal rate for this category of workers is $2.13 per hour). However, employers in the state must ensure that tipped employees’ total hourly earnings (including tips) reach or exceed the standard minimum wage of $7.25 per hour. If they don’t, employers must make up the difference.
What Is the Fair Labor Standards Act?
So, the North Dakota minimum wage rate is set by the Fair Labor Standards Act, but what is the FLSA exactly, and who does it apply to?
The Fair Labor Standards Act (FLSA), is a federal law enacted in 1938 that establishes minimum wage, overtime pay, record-keeping, and child labor standards for workers in both the private and public sectors. The FLSA applies to most employees in the United States, and it ensures that non-exempt employees are paid at least the federal minimum wage of $7.25 per hour and receive overtime pay at 1.5 times their regular rate for any hours worked over 40 in a workweek.
The FLSA applies to employees of businesses that engage in interstate commerce or have gross annual revenues of at least $500,000. It also covers certain categories of workers, such as domestic service employees, hospital workers, and schools. While the FLSA provides wage protections for most workers, there are exemptions, including certain salaried employees in executive, administrative, and professional roles, as well as some agricultural and seasonal workers.
These standards are applied to all non-exempt employees.
What Is a Non-Exempt Employee?
One important thing to consider when talking about the North Dakota minimum wage is the employment classification of your workers. In other words, whether your employees are classified as exempt or non-exempt from the requirements of the Fair Labor Standards Act (FLSA).
Let’s break it down.
According to the Fair Labor Standards Act, there are two types of employees:
- Exempt employees. An employee who you class as being exempt from the overtime provisions of the Fair Labor Standards Act (FLSA), such as executive, professional, and administrative roles.
- Non-exempt employees. An employee who you do not class as being exempt from the overtime provisions of the Fair Labor Standards Act (FLSA) and who you, therefore, must pay overtime when they work over their contracted hours.
To determine if your employees should be classified as exempt or non-exempt, you need to consider the following:
- Salary level. Are you paying the employee more than $35,568 per year?
- Salary basis. Do you offer them a guaranteed minimum compensation amount, regardless of the hours they actually work?
- Duties: Have you contracted them to perform an exempt job duty? (Professional duties that require specialized education; executive duties such as supervising a team; or administrative duties that require the use of discretion and judgment).
Once you determine an employee’s classification, you will know whether or not the provisions of the FLSA, including the North Dakota minimum wage, apply.
Additional Exemptions to the North Dakota Minimum Wage
Aside from the above, there are some additional exemptions to the North Dakota minimum wage that you need to be aware of when you design your compensation strategy.
Here’s an overview of these exemptions:
- North Dakota minimum wage for tipped workers. North Dakota allows employers to take a tip credit, which means they can pay tipped employees less than the federal minimum wage, as long as the employee’s tips bring their earnings up to at least the minimum wage. The tipped minimum wage in North Dakota is $4.86 per hour (which is 50% of the federal minimum wage of $7.25).
- North Dakota minimum wage for minors. Employers in North Dakota can pay employees under the age of 20 a minimum wage of $4.25 per hour for the first 90 consecutive calendar days of employment. After 90 days, they must be paid the full federal minimum wage of $7.25 per hour.
- Student workers. You can pay full-time students working in retail, agriculture, or universities 85% of the federal minimum wage under the federal full-time student program. However, students are limited to 20 hours of work during the school term.
- Agricultural workers. Many agricultural workers in North Dakota are exempt from minimum wage requirements under the Fair Labor Standards Act (FLSA). This includes family members of farm owners, small farms with less than $500,000 in sales, hand-harvest laborers, certain local seasonal workers, and range workers involved in livestock operations.
- Independent contractors. Finally, independent contractors are not covered by federal or state minimum wage laws, as they are not considered employees under the FLSA. Employers must be careful to classify workers correctly to avoid penalties.
Who Enforces the North Dakota Minimum Wage?
The North Dakota minimum wage is enforced by the U.S. Department of Labor’s Wage and Hour Division (WHD). Enforcement is at a federal level since the state adheres to the federal minimum wage set by the Fair Labor Standards Act (FLSA). The WHD is responsible for investigating complaints, ensuring compliance with wage laws, and addressing violations related to minimum wage, overtime pay, and other labor standards. Employees can file complaints directly with the WHD if they believe their employer is not complying with the minimum wage laws.
In addition, the North Dakota Department of Labor and Human Rights plays a role in enforcing state wage and hour laws, including those that differ from federal requirements, such as state-specific regulations related to breaks and meal periods.
What Other North Dakota Wage Laws Are There?
Although North Dakota has maintained the federal minimum wage since it was enacted in 1938, there are a number of notable wage laws in the state that differ from federal standards. Let’s explore these North Dakota wage laws so you can make sure your business is compliant.
Employee Classification
Proper employee classification is crucial for determining wage and overtime eligibility. In North Dakota, like in the rest of the country, workers are classified as either exempt or non-exempt under the Fair Labor Standards Act (FLSA). Exempt employees are generally salaried and not entitled to overtime, while non-exempt employees are hourly and must receive overtime pay for any hours worked beyond 40 in a workweek. Misclassifying employees as exempt when they should be non-exempt can lead to costly penalties and back pay claims, so it’s essential to accurately assess each worker’s job duties and compensation.
Overtime
The Fair Labor Standards Act includes provisions relating to employee overtime. To determine whether or not you need to pay your employees overtime for any hours they work over their contracted working hours you first need to determine what their FLSA status is, as we saw above.
If your employees are categorized as exempt, then you have no obligation to pay them overtime if they work over their contracted hours in a given week. However, if your employees are non-exempt then you must pay following the FLSA’s overtime rules. Essentially this means that you must pay employees covered by the FLSA overtime pay for any hours worked over 40 in a workweek at a rate not less than time and a half (one-half their regular rate of pay).
Payment of Wages Upon Termination
When an employee is terminated or leaves a job voluntarily in North Dakota, the employer must provide final payment of all earned wages by the next regularly scheduled payday. Employers cannot withhold final wages or delay payments. Additionally, employers must account for any unused vacation time if it is considered part of the employee’s wage package under company policy. Ensuring timely and accurate final payments is essential to comply with state laws and avoid disputes with former employees.
Meal and Rest Break Requirements
According to North Dakota law, employees working shifts longer than five hours must be provided with at least a 30-minute unpaid meal break. Employees must be completely relieved of all work duties during this period.
While North Dakota does not require employers to offer short rest breaks (20 minutes or less), if employers do provide them, they must be counted as paid time. This differs from federal law, which does not mandate meal or rest breaks.
Timekeeping and Record-Keeping
Finally, employers in North Dakota must maintain detailed and accurate records to comply with both state and federal labor laws.
Specifically, employers must keep detailed records of employee wages, hours worked, and any overtime payments for at least three years. This includes recording the exact time when employees begin and end their shifts, meal breaks, and any overtime hours worked.
Additionally, employers must maintain records that detail employee information, including full names, Social Security numbers, addresses, dates of birth for employees under 19, and wage rates. These records should be readily accessible in the event of an audit by the U.S. Department of Labor or in response to wage claims by employees.
Best Practices for Employer Wage Law Compliance
And that’s pretty much everything you need to know about the North Dakota minimum wage! All that remains is to ensure that your business complies with these requirements.
To help you out, we have put together a series of best practices for employer wage law compliance. That way, you can protect your business and foster a positive and compliant work environment for your employees.
Understand the Minimum Wage
Firstly, as an employer in the Flickertail State, it’s crucial to stay updated on North Dakota minimum wage rates. These are set by federal law and can vary based on employee status. In addition, familiarize yourself with the minimum wage requirements for your specific industry to ensure you’re paying your employees the correct amount.
Classify Employees Correctly
Secondly, make sure you properly classify your employees as either exempt or non-exempt under the FLSA. This classification determines whether you must offer overtime pay. Carefully review the duties and responsibilities of each employee to determine their exempt or non-exempt status.
Implement Accurate Payroll Practices
Thirdly, maintain accurate and up-to-date payroll records so that your payroll calculations are always processed correctly. Regularly review your payroll records to identify any inconsistencies or errors. Use payroll software to streamline your payroll processes and minimize errors. You should also create a payroll checklist to keep you on track during each payroll cycle. That way, you won’t miss any important steps, such as verifying employee hours, ensuring correct pay rates and calculating payroll tax deductions.
Track Overtime Hours
In addition, make sure you accurately track overtime hours worked by non-exempt employees. Implement a system for employees to report overtime hours, such as using timesheets or electronic timekeeping systems. Make sure you calculate and pay overtime at the correct rate.
Provide Meal and Rest Breaks
Another important aspect to consider is breaks. Make sure you provide non-exempt employees with meal and rest breaks as defined by state law (see above). Make sure employees have access to designated break areas and take mandated breaks throughout their workday.
Maintain Accurate Records
Finally, it’s important to maintain accurate and up-to-date records of all employee work hours and wages in order to comply with recordkeeping requirements. Using employee record management software can make this easier. These systems help you maintain accurate and reliable records so that you can focus on other important parts of your business while staying compliant with North Dakota wage law.
How Factorial Can Help Your Business
Ensuring compliance with North Dakota wage laws is crucial for employers to avoid potential penalties and legal disputes. Factorial can help you navigate the complexities of North Dakota’s employment guidelines and streamline your entire payroll process.
Features of Factorial’s payroll solution that can help ensure North Dakota wage law compliance:
- Automated payroll calculations. Accurately calculate wages, including overtime and tipped wages, based on North Dakota and federal laws.
- Time and attendance tracking. Ensure accurate record-keeping for hours worked, breaks, and overtime to meet legal requirements.
- Customizable wage settings. Adjust settings for various worker classifications, such as exempt, non-exempt, and tipped employees, to maintain compliance.
- Comprehensive reporting tools. Generate detailed reports on employee hours, wages, and compliance metrics to stay audit-ready.
- Employee classification. Properly classify workers and manage different wage rates for exempt, non-exempt, and seasonal employees.
- Automated final pay processing. Ensure timely and accurate payment of final wages when an employee leaves, as required by North Dakota law.
- Real-time updates on North Dakota wage laws. Stay up to date with any changes in federal and state wage regulations to ensure ongoing compliance.
Ultimately, with all these tools at your disposal, you can automate and streamline your entire payroll process, keep updated on any updates to the North Dakota minimum wage, and foster a positive and compliant work environment for all.
