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Q: Minimum wage ( Answered 5 out of 5 stars,   1 Comment )
Subject: Minimum wage
Category: Business and Money > Employment
Asked by: vercingatorix-ga
List Price: $15.00
Posted: 04 Jan 2005 07:48 PST
Expires: 03 Feb 2005 07:48 PST
Question ID: 451646
Can a portion of the minimum wage be paid with taxable fringe
benefits? In other words, if a for-profit school provided free
schooling for employees worth $100 a week, could that schooling be
counted as a portion of the required wage, with the rest being paid in

Please provide an answer for both federal law and the law of the state
of Indiana. Indiana uses the federal minimum wage, but enforces some
labor laws differently.


Request for Question Clarification by markj-ga on 04 Jan 2005 11:33 PST
vercingatorix --

I am in the process of navigating through the thicket of wage and hour
laws and regulations in order to give you some responsive information,
but one clarification is needed.  Can I assume that the "for-profit
school" cited in your example is not "a college or university, a
junior college, or a professional school of engineering, law, library
science, social work, etc."?


Clarification of Question by vercingatorix-ga on 04 Jan 2005 14:16 PST
Actually, I was just using a hypothetical. The situation is
complicated, but the entity in question may be either a for-profit or
a nonprofit, and for either a school or a day care. If the answer is
different depending on the tax status or business type, please let me
know, and I'll either sweeten the payment or limit the question.

Please keep in mind, I already know which benefits are taxable and how
to account for them. All I need is information about whether I can use
taxable benefits to satisfy minimum-wage requirements.


Request for Question Clarification by markj-ga on 04 Jan 2005 15:04 PST
vercingatorix --

Sorry to bother you again, but the situation is complicated at my end too:)  

Just so I can avoid littering an answer on this rather complicated
subject with a lot of "it depends,"  are you talking about a business
grossing less than $500,000 a year? If not, the answer is quite
straightforward, since federal law applies.

However, if you are talking about a smaller business than that,
Indiana's law will apply instead of the federal law.  The answer is
likely still straightforward, unless your hypothetical situation
involves the state-law "exception" to the minimum wage requirement
that allows a "regular" student at a school (any school) to be paid
less than the minimum wage for services performed for that school.

Subject: Re: Minimum wage
Answered By: markj-ga on 04 Jan 2005 16:44 PST
Rated:5 out of 5 stars
v --

Thanks for your first clarification.  I now think that I have enough
information to give you a complete and concise answer without awaiting
an answer to my follow-up post.  If I am wrong, please feel free to
ask for clarification of this answer.

First, the usual disclaimer.  As you know, researchers are not
authorized to give legal advice, so the information I have found for
you from published sources is intended only for information purposes.

In general, the information I have found supports the conclusion that
employees (under both federal and Indiana law) are entitled to be paid
the current mininum wage ($5.15 under both federal and Indiana law) in
cash, not non-cash benefits.

Federal minimum wage law governs Indiana employees whose employers
gross more than $500,000 per year; otherwise Indiana law applies:

"If an entity grosses over $500,000 a year or is involved in
interstate commerce, the U.S. Department of Labor, Wage & Hour
Division has jurisdiction of any Minimum Wage, Overtime, or Record
Keeping issues pertaining to such an entity."

Indiana Department of Labor: Wage and Hour Division 

If the federal Fair Labor Standards Act applies to your situation, an
employee is specifically entitled to the minimum wage in cash, with
exceptions for tipped employees and for room and board that apparently
are not relevant to your situation:

"a) Standing alone, sections 6 and 7 of the [Fair Labor Standards] Act
require payments of the prescribed wages, including overtime
compensation, in cash or negotiable instrument payable at par. Section
3(m) provides, however, for the inclusion in the ``wage'' paid to any
employee, under the conditions which it prescribes of the ``reasonable
cost,'' or ``fair value'' as determined by the Secretary, of
furnishing such employee with board, lodging, or other facilities. In
addition, section 3(m) provides that a tipped employee's wages may
consist in part of tips. It is section 3(m) which permits and governs
the payment of wages in other than cash."

Title 29 Code of Federal Regulations, Section 531.27

Here is the relevant portion of the  text of Section 3(m) of the FSLA,
which is referred to above:

"(m) 'Wage' paid to any employee includes the reasonable
cost, as determined by the Secretary of Labor,10 to the
employer of furnishing such employee with board, lodging,
or other facilities, if such board, lodging, or other facilities
are customarily furnished by such employer to his employees.  .   .  ."

Fair Labor Standards Act: Section 3(m) (Page 7 of PDF document)

Indiana law (which applies to small businesses with less than $500,000
in gross revenue) is less explicit about the cash payment requirement,
since it does not statuorily define "wage."  However, the governing
statute, which is broadly based on the federal statute, includes
several references to "cash wage."  For example:

"c) An employer subject to subsection (b) is permitted to apply a "tip
credit" in determining the amount of cash wage paid to tipped
employees. In determining the wage an employer is required to pay a
tipped employee, the amount paid the employee by the employee's
employer shall be an amount equal to: (1) the cash wage paid the
employee which for purposes of the determination shall be not less
than the cash wage required to be paid to employees covered under the
federal Fair Labor Standards Act of 1938, as amended (29 U.S.C.
203(m)(1)) on August 20, 1996, which amount is two dollars and
thirteen cents ($2.13) an hour;"
Indiana Code: Section 22-2-2 and 22-2-3 

Also highly relevant to this conclusion is this relevant reference to
a "cash wage" in the poster required to be displayed on the premises
of Indiana employers that are subject to the Indiana minimum wage law:

"Employers of ?tipped employees? must pay a cash wage of at least $2.13
per hour if they claim a tip credit against their minimum wage obligation. If an
employee's tips combined with the employer's cash wage of at least
$2.13 per hour do
not equal the minimum hourly wage, the employer must make up the
difference. Certain
other conditions must also be met."
Indiana Department of Labor: Indiana's Minimum Wage

Search Strategy:

I am familiar with the Fair Labor Standards Act, and I began my
research by searching within that law and the relevant sections of the
Code of Federal Regulations.  I then used various Google searches to
find corresponding information about Indiana and to gain reasonable
confidence that it is correct and that there is no contradictory
online information.  Here are links to two of those searches:

"minimum wage" "indiana" law cash

"indiana administrative code" minimum wage

As noted above, I am reasonably confident that this has been a
complete statement of the information you are seeking.  However, given
the complicated nature of the subject matter, please feel free to ask
for clarification if anything is unclear or you have any unresolved

vercingatorix-ga rated this answer:5 out of 5 stars and gave an additional tip of: $2.00
Researcher provided everything I wanted. Information was
well-presented and accurate.

Subject: Re: Minimum wage
From: markj-ga on 06 Jan 2005 07:17 PST
v --

Thanks for the kind words, the five stars and the tip.


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