Paying below the minimum wage is legal only in a few specific situations spelled out in the Fair Labor Standards Act. The federal floor is $7.25 per hour, and most workers must receive at least that much.1Office of the Law Revision Counsel. 29 USC Chapter 8 – Fair Labor Standards The narrow exceptions cover tipped employees, workers under 20 during their first 90 days, full-time students and student-learners working under a Department of Labor certificate, certain workers with disabilities employed under a Section 14(c) certificate, and a few fully exempt salaried categories. State or city law often sets a higher floor, and when more than one minimum wage rule applies, the employer owes the highest of them.2U.S. Department of Labor. Minimum Wage
Tipped Employees
Employers can pay tipped workers a direct cash wage as low as $2.13 per hour, but only if tips bring the worker’s total hourly earnings to at least $7.25. That arrangement is called a tip credit, and the $2.13 figure is tied to the cash wage required on August 20, 1996.3Office of the Law Revision Counsel. 29 USC 203 – Definitions If tips fall short in any workweek, the employer has to make up the entire gap.
Before using the tip credit, the employer must tell the worker about it, including the cash wage, the credit amount, and the shortfall makeup rule. Skip that notice and the tip credit is invalid; the full $7.25 is owed. Several states require a higher tipped cash wage or don’t allow a tip credit at all, so check state law before relying on the federal figure.
Tip pooling is allowed, but with limits. When a tip credit is in effect, the pool is restricted to workers who regularly receive tips, so back-of-house staff like cooks and dishwashers cannot be included.4eCFR. 29 CFR Part 531 Subpart D – Tipped Employees Managers, supervisors, and the employer itself can never take a share of employee tips, whether a tip credit is used or not.
Workers Under 20 in Their First 90 Days
Workers younger than 20 can be paid as little as $4.25 per hour during their first 90 consecutive calendar days with any given employer.5Office of the Law Revision Counsel. 29 USC 206 – Minimum Wage The 90-day clock counts every calendar day from the first day of work, not just days actually worked. Once those 90 days end or the worker turns 20, whichever comes first, the full minimum wage applies.
To keep employers from rotating teenagers through a permanent $4.25 position, the law prohibits firing or reducing the hours of any employee to make room for a youth-wage hire.6U.S. Department of Labor. Fact Sheet 32 – Youth Minimum Wage – Fair Labor Standards Act Replacing an aged-out youth-wage worker with another one for the same reason is also a violation.
Full-Time Students
Full-time students working in retail, service, agriculture, or at their own college or university can be paid 85% of the minimum wage, or $6.16 per hour federally.7U.S. Department of Labor. Fair Labor Standards Act Advisor – Wages for Youth The employer has to obtain a certificate from the DOL’s Wage and Hour Division before using this rate; there is no “pay first, apply later” option.
The certificate caps the student’s hours at 8 per day and 20 per week while school is in session, rising to 40 per week during breaks.8U.S. Department of Labor. Full-Time Student Program Once the student graduates or leaves school for good, the full minimum wage kicks in.
Student-Learners in Vocational Programs
Student-learners enrolled in accredited vocational training programs can be paid at least 75% of the applicable minimum wage, or $5.44 per hour federally.9U.S. Department of Labor. Fact Sheet 65 – Rounding Practices for Student-Learners Earning Subminimum Wages The employer must apply for a certificate, and the student’s combined school and work-training hours generally cannot exceed 40 per week.10GovInfo. 29 CFR Part 520 Subpart E – Student-Learners Student-learners must be at least 16, or 18 for jobs classified as hazardous.
Workers With Disabilities Under Section 14(c)
Section 14(c) of the FLSA lets employers who hold a special certificate pay workers with disabilities below the minimum wage, but only when the disability directly reduces the worker’s productive capacity for the specific job being performed.11U.S. Department of Labor. Fact Sheet 39 – The Employment of Workers With Disabilities at Subminimum Wages The rate has to be pegged to the worker’s measured productivity compared to a non-disabled worker doing the same tasks. Having a disability is not enough on its own; the employer must document the effect on that particular job.
The program has been contracting for years. Roughly 424,000 workers were employed under 14(c) certificates in 2001, compared to about 40,579 in 2024. In December 2024, the Department of Labor proposed phasing out the certificates entirely, then withdrew that proposal in July 2025 after concluding it lacked the statutory authority to end the program on its own.12Federal Register. Employment of Workers With Disabilities Under Section 14(c) of the Fair Labor Standards Act – Withdrawal A separate bill to phase out 14(c) over five years has been introduced in Congress but not enacted.13Congress.gov. S.2438 – Transformation to Competitive Integrated Employment Act The certificate program remains active for now.
Salaried and Outside-Sales Employees With No Hourly Floor
Some workers are exempt from both minimum wage and overtime rules altogether, meaning there is no per-hour minimum for them at all. The most common exemption covers executive, administrative, and professional employees who earn at least $684 per week ($35,568 per year) on a salary basis and meet the specific duties tests for their category.14U.S. Department of Labor. Earnings Thresholds for the Executive, Administrative, and Professional Exemption From Minimum Wage and Overtime Protections Under the FLSA A 2024 DOL rule that would have raised the salary threshold was vacated by a federal court, so the 2019 level still controls.
Outside sales employees who primarily work away from the employer’s premises making sales or obtaining contracts have no salary requirement at all.15eCFR. 29 CFR Part 541 Subpart F – Outside Sales Employees A commission-only outside salesperson could technically earn less than $7.25 an hour in a slow week and still be within the law.
Deductions That Quietly Push Pay Below Minimum
An employer can set an hourly rate at or above $7.25 and still end up violating the minimum wage through deductions. The cost of uniforms, tools, cash register shortages, and other items that primarily benefit the business cannot be deducted if it would drop the worker’s effective pay below the minimum wage.16U.S. Department of Labor. Fact Sheet 16 – Deductions From Wages for Uniforms and Other Facilities Under the Fair Labor Standards Act A cashier paid exactly $7.25 who has to cover a drawer shortage is, for that pay period, being paid below minimum wage.
The rule still applies when the loss is the worker’s fault, and it cannot be sidestepped by asking the employee to pay cash out of pocket instead of taking a payroll deduction. Workers earning more than $7.25 can be docked, but only down to the minimum wage floor.
What It Costs to Pay Below Minimum Wage Without a Valid Exception
An employer who underpays without one of the exceptions above owes the difference as back wages for every affected pay period, plus liquidated damages equal to those back wages, effectively doubling the bill.17Office of the Law Revision Counsel. 29 USC 216 – Penalties Liquidated damages can be reduced only if the employer proves the violation was in good faith with reasonable grounds for believing the pay was lawful.18Office of the Law Revision Counsel. 29 USC 260 – Liquidated Damages
Workers can sue privately for the unpaid wages, liquidated damages, attorney’s fees, and court costs. The statute of limitations is two years from each violation, or three years if the conduct was willful.19Office of the Law Revision Counsel. 29 USC 255 – Statute of Limitations The Department of Labor can also bring its own action and, for repeated or willful violations, assess a civil money penalty of up to $2,515 per violation as of 2025, adjusted annually.20U.S. Department of Labor. Civil Money Penalty Inflation Adjustments Penalties run per affected employee, so a shop underpaying a dozen workers is looking at a bill that stacks quickly.