Minimum Wage Laws: Federal, State, and Local Rates Explained

A Floor, Not a Ceiling

The federal minimum wage has been $7.25 per hour since July 24, 2009 — the longest period without an increase in the law's history. But the federal rate is a floor, not a ceiling. States, counties, and cities may — and frequently do — set higher minimum wages. When state and federal rates conflict, the higher rate applies. Workers in high-wage jurisdictions like California and Washington have minimum wages more than double the federal standard.

The federal minimum wage is set by the Fair Labor Standards Act of 1938 (FLSA), which established the first national minimum of $0.25 per hour. The rate has been raised 22 times since then, most recently in three stages between 2007 and 2009 under the Fair Minimum Wage Act of 2007.

The Federal Standard and Its Coverage

The FLSA minimum wage applies to employees covered by the Act — generally those working for employers with $500,000 or more in annual revenue, or those engaged in interstate commerce. Because almost all commercial activity involves interstate commerce in some way, coverage is nearly universal.

Key aspects of federal minimum wage law:

• Applies to all hours worked in a workweek — not just scheduled hours
• Time worked includes all time the employer "suffers or permits" the employee to work
• The rate applies to each individual workweek; averaging hours across weeks is not permitted
• Youth minimum wage: employers may pay workers under 20 years old $4.25 per hour for the first 90 calendar days of employment

Tipped Employee Rules

Federal law allows employers to pay tipped workers a cash wage of $2.13 per hour — a rate that has not changed since 1991. The employer must ensure that tips received bring the employee's total hourly compensation to at least $7.25. If tips fall short, the employer must pay the difference. This is called the "tip credit" or "tip wage."

However, many states have abolished or reduced the tip credit:

• Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington require tipped employees to receive the full state minimum wage before tips
• New York applies different tip credits by industry (food service vs. other service)

The Department of Labor's 2021 rule changes also expanded tip pooling rules. Back-of-house workers (cooks, dishwashers) may now receive tips from pooled arrangements, but only when no tip credit is claimed by the employer.

State Minimum Wages — Selected 2024/2025 Rates

Local Minimum Wages

Over 60 cities and counties have enacted minimum wages higher than their state rates. This adds a third layer of complexity for employers operating across jurisdictions.

• Seattle: $20.29/hr (2024, for large employers)
• San Francisco: $18.67/hr (2024)
• Washington D.C.: $17.50/hr (2024)
• Denver: $18.29/hr (2024)

Some states preempt local minimum wage laws, prohibiting cities and counties from setting rates above the state level. These preemption laws exist in states including Florida (after 2021), Alabama, Georgia, Louisiana, and Mississippi.

Exemptions from Federal Minimum Wage

The FLSA contains several exemptions from both minimum wage and overtime requirements:

Enforcement and Wage Theft

The Department of Labor's Wage and Hour Division (WHD) investigates minimum wage complaints. Workers who file complaints are protected from retaliation. The WHD may investigate an employer's entire workforce — not just the complaining worker — when it finds probable violations.

Remedies for minimum wage violations under FLSA include:

• Back wages for all underpaid hours within the statute of limitations (2 years, 3 for willful violations)
• Liquidated damages equal to 100% of the back wages owed
• Civil money penalties up to $1,000 per violation for child labor violations and up to $10,000 per violation for repeat minimum wage violations

State enforcement agencies may provide additional remedies, and several states allow treble damages for wage theft violations. Workers may also bring private lawsuits individually or as collective actions under FLSA's opt-in mechanism.

This article is for informational purposes only and does not constitute legal advice.