I just returned from a wonderful three weeks of vacation, which included a week in sunny Cabo San Lucas.1 Spectacular golf, poolside cocktails, beachfront massages, endless amounts of tequila2 and some of the best service I’ve had at a resort.3 In particular, two bartenders stand out—Esmerelda and Isabel—whose “office” (if you will) has a view of such beauty that almost everyone else at the resort has to pay to see it, while they get paid to be there.
Or so you’d think. It turns out that Esmerelda and Isabel basically work for nothing. Not quite nothing, but close—a paltry sum of pesos that, depending on the exchange rate for the day, roughly equates to $1 por hora. In a good month, with tips, they each can make about $200 USD4—no joke—even when you account for the income tax rate difference (in Mexico, the rate is right around 19 percent, according to MSN Money). This makes even the federal minimum wage seem like a king’s ransom in comparison.5
Of course, all these discussions made me think about California’s minimum wage laws and the complexities that can ultimately give employers fits. I mean, how easy would it be if employers could pay $1 per hour and distribute (or keep) tips as they see fit?6 Since that’s unlikely to ever happen, it’s probably best that employers understand our rules.
Minimum wage is non-negotiable. No one cares that you and the employee “agreed” to a different wage. Pay it—the whole thing (at a minimum) of $8 per hour (minimum wage in California)—unless the employee is a sheepherder. They must be paid at least $1,422.52 per month, with no offsets for meals and lodging.
For hourly employees, “overtime” is a minimum wage standard obligation. For most California employees, this means all hours worked over eight in a day or 40 in a workweek. It also applies to all hours worked on the seventh consecutive day of work in the same workweek.
“Double time” kicks in after 12 hours of work on any day of the workweek. If the employee works all seven days of the workweek, double time applies for hours in excess of eight on that seventh day.
There is no “tip credit” in California. In addition, employees get to keep all of their tips, with the exception of tip pooling arrangements. (See “Keep the Change,” Aug. 2009.) The only credit an employer can take against the minimum wage are for employer-provided meals and lodging. Those credits are limited to the amounts stated in California’s Minimum Wage Order.
Different rates for different work. An employer and employee can agree to different rates for different types of work. For instance, you can have one rate of pay for actual work and another rate of pay for something like compensable travel time. If you do this, you need to make sure it’s in writing and specifies the rates. The writing must also specify how overtime will be calculated (for example, a blended rate or one based on the type of work done during the hours constituting overtime).
Exceptions. There are some exceptions to the minimum wage requirements. One is for “outside sales persons.” Individuals who are truly engaged in outside sales need not be paid minimum wage so long as their compensation is commission-based. In other words, it’s feast or famine. Another exception is for “learners,” which are employees who are working in an occupation in which they have no previous, similar or related experience. True “learners” may be paid not less than 85 percent of the minimum wage (rounded to the nearest nickel) for the first 160 hours of employment. There are some other obscure exceptions. Before attempting to avail yourself of them, call your lawyer.
This isn’t the easiest set of rules to follow, but it’s important that you do. Failing to pay the minimum wage in California is a crime (misdemeanor). And while you won’t likely end up in a Mexican prison for failing to follow these rules, the civil penalties and headache you’ll face will make the tequila hangover seem like a walk in the park.
1 This perfectly coincided with the dreary rains that hit the North Bay. Why is it that a vacation feels so much better when you know your co-workers are suffering crappy weather back home?
2 Ahh, Cazadores. If it weren’t 8:30 a.m. on the day this article goes to print…(The latter being the larger consideration, frankly.)
3 What resort is this, you ask. I’ll tell you as soon as they decide to pay me for the advertising.
4 And I don’t think the tip pooling program is particularly favorable. While I speak a good bit of Spanish, my attempt at understanding the intricacies of tip pooling looked more like a game of drunken charades (ahh, Cazadores), than an instructional video on Mexican tip pooling law. I can say this—both Esmerelda and Isabel were clearly displeased with the way tips are distributed.
5 $7.25 an hour. And we wonder why the denizens of our southern neighbor risk life and limb to enter this country.
6 To be clear, I am not suggesting this. Although it might stem some of the illegal immigration our politicians complain about whenever it serves an electoral purpose.
