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Do I Have to Pay Employees for Training?

Yes, you have to pay employees for training.  The question is, how much.  In some states, it may be less than minimum wage.   Federal law sets certain minimum standards, but states and localities may enact provisions that are more generous to employees, and there is considerable variation among the states.  Texas, for example, essentially adopts federal law. California and New York are different. The interaction of these layers of law can get very complicated.   In addition to the basic issue of how to calculate a rate, you should know that if you require an existing employee to get additional training as a condition of employment, you must pay for the training time and travel costs. Then there are internships, which are often misunderstand. The truth is that there may be better ways for you to reduce the cost of having employees than looking for free labor or paying a subminimum wage.

Federal Law Creates Exceptions for Employers Who Pay Employees for Training

The Fair Labor Standards Act requires that most employers pay non-exempt employees (generally those who are not salaried) a minimum wage, currently set at $7.25 per hour. For the first 90 days of employment, however, an employer may pay workers under age 20 a training wage of at least $4.25 per hour. This special rate is limited to the first 90 calendar days following the employee’s first day of work, so it counts weekends. If the worker turns 20 during that 90-day period, the wage rate must rise immediately to at least the minimum wage.

The Department of Labor has also established a special minimum for full-time students working in retail or service stores, agriculture, or colleges and universities. The employer must obtain a certificate from the DOL that permits the employer to pay not less than 85% of the minimum wage. The certificate also limits the hours that the student may work.

The DOL has a similar program for high school students who are at least 16 years old and enrolled in vocational education. This provision reduces the rate to 75% of the minimum wage. There are also more limited exceptions for workers with disabilities and workers enrolled in an apprentice programs.  In some circumstances, it may make sense to pay employees for training opportunities at this very reduced rate.

California Has a Higher Minimum, but Different Rules for Trainees

The minimum wage in California is currently $8 per hour, increasing to $9 on July 1, 2014 and $10 on January 1, 2016. Employers, however, may pay learners, regardless of age, as little as 85% of the minimum wage for their first 160 hours of work. Additional exemptions exist for disabled employees and workers at nonprofits where the employer has obtained a certificate from the California Division of Labor Standards Enforcement.

As of January 1, 2014, San Francisco’s minimum wage became $10.75. Therefore, a San Francisco employer must look at the interaction of San Francisco, California and federal laws in order to determine how much to pay employees for training. It’s the layering that gets complicated.

New York Has Its Own Special Exceptions

New York State’s minimum wage is $8.00 as of December 31, 2013 and will increase to $8.75 by 2015 and $9.00 by 2016. New York adopts the federal rules for workers under 20 and high school students. The situation may be different, however, for particular employers in particular locations. In New York City, for example, developers receiving city subsidies for projects must pay workers at those sites at least $10 an hour plus benefits, or $11.50 without benefits.

Other Ways to Reduce the Cost of Employees

The intricacies of employment law are fun for lawyers, but small business owners just want to reduce costs. Unpaid internships may be attractive as a source of bright, young talent, but they must actually be designed for the educational benefit of the intern. Paying very low wages may increase the risk of turnover, which can be very expensive.  It may also be worth exploring tax incentives for hiring and training certain groups of employees, which may ultimately create more savings than hiring workers at a subminimum wage.

Nasir Pasha, Esq.

Post by:

Managing attorney and co-host of podcast Legally Sound | Smart Business

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