Employment Compensation Law & Legal Definition

There are laws covering requirments for minimum wages, overtime pay, back wages, docking of wages, requiring an employee to take comp time in lieu of overtime payment, pay periods, garnishment of wages, and pension payments. The are no legal obligations on an employment to offer severance pay upon termination of employment. Issues of illegal discriminatory practices may also arise when improper reasons are used to pay unequal wages for essentially the same work.

The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in Federal, State, and local governments. Covered nonexempt workers are entitled to a minimum wage of not less $7.25 an hour, effective July 24, 2009.

For covered, nonexempt employees, the Fair Labor Standards Act (FLSA) requires overtime pay at a rate of not less than one and one-half times an employee's regular rate of pay after 40 hours of work in a workweek. Some exceptions to the 40 hours per week standard apply under special circumstances to police officers and firefighters employed by public agencies and to employees of hospitals and nursing homes.

Some states also have enacted overtime laws. Where an employee is subject to both the state and federal overtime laws, the employee is entitled to overtime according to the higher standard (i.e., the standard that will provide the higher rate of pay).

Employment taxes are imposed for a variety of purposes - such as social security tax, Medicare tax, unemployment insurance, state disability programs. Some of these taxes are paid for by the employee, for some by the employer, and some both the employee and the employer make the "contribution." Employment taxes arise under both federal and state tax systems.