Guide to Vermont Minimum Wage Laws & Employer Requirements

Knowing Vermont’s minimum wage laws is a key part of managing compliance and payroll effectively. Laws and rates change annually, and employers must stay updated to avoid penalties and ensure fair pay for employees.

Starting January 2025, Vermont's updated minimum wage reflects adjustments linked to inflation and economic trends. Employers need to align their payroll systems with these changes to meet state requirements.

Whether you employ tipped workers or non-tipped staff, Vermont's regulations outline specific pay structures and obligations. Understanding the details ensures your organization stays compliant and employees are paid correctly.

Vermont Minimum Wage Requirements

The minimum wage in Vermont increased to $14.01 per hour on January 1, 2025, up from $13.67 in 2024. Each year, Vermont adjusts the rate based on the Consumer Price Index (CPI) or a maximum increase of 5%, whichever is smaller.

The law applies to employers with at least two employees. For tipped workers, the base wage is $7.01 per hour, which equals 50% of the full minimum wage. Employers must ensure tipped employees earn at least $14.01 per hour when combining hourly wages and tips. If tips do not bring total earnings to this amount, employers are legally required to make up the difference.

The adjustments and employer obligations are outlined in Vermont’s 21 V.S.A. § 384. Employers must also display updated labor law posters in the workplace to comply with state posting requirements.

Tipped Wage

In Vermont, tipped employees are paid a base wage of $7.01 per hour as of January 1, 2025. This rate is set at half the state's full minimum wage, but employers must ensure tipped workers still earn at least $14.01 per hour when wages and tips are combined. If tips don't bring total earnings to that level, the employer is legally required to cover the difference.

This rule applies to employees in industries where tipping is customary, and monthly tips exceed $120. Common examples include:

Restaurants and bars: Positions like servers, bartenders, and hosts often rely on gratuity for a significant portion of their income.
Hotels: Roles such as bellhops, valets, and housekeepers frequently earn tips for providing direct services to guests.
Event and hospitality services: Banquet staff, coat check attendants, and similar positions also fall under this category.

Employers in these sectors must track both wages and tips carefully to ensure compliance. This includes maintaining accurate records and conducting regular reviews to confirm employees are meeting or exceeding the full minimum wage threshold.

Exemptions from Minimum Wage

Certain employees in Vermont are not covered by the state's minimum wage laws due to their specific roles or employment arrangements. Employers need to understand these exemptions to ensure compliance and avoid costly mistakes.

Who Is Exempt?

Several categories of workers fall outside Vermont's minimum wage requirements:

Student workers: High school or college students employed part-time in non-hazardous positions, such as library assistants or cafeteria aides, may qualify for an exemption.
Agricultural workers: Farm laborers involved in tasks like planting, harvesting, or caring for livestock are often excluded. However, exemptions depend on the nature of the work and the employer's classification.
Government employees: Employees working for state or local governments under temporary, part-time, or volunteer arrangements may also be exempt.

Apprentices and Trainees

Employers can pay apprentices and trainees less than the minimum wage if they are part of a program approved by state or federal authorities. These programs must provide structured training and meet all legal requirements. Proper documentation is non-negotiable to ensure the arrangement is legitimate and compliant.

Avoid Misclassification

Exemptions are not automatic or guaranteed. Employers must thoroughly review each role against Vermont’s labor laws to determine if the exemption applies. Misclassifying an employee as exempt when they are not can lead to significant penalties, back pay obligations, and legal scrutiny. Keep detailed records and consult labor guidelines to confirm classifications.

Overtime Requirements

Vermont employers follow the federal Fair Labor Standards Act (FLSA) when it comes to overtime rules. Employees classified as non-exempt must be paid overtime for any hours worked beyond 40 in a single workweek. Overtime pay is calculated at 1.5 times the employee's regular hourly wage.

The FLSA defines a workweek as a consistent, recurring period of seven consecutive 24-hour days, totaling 168 hours. Employers can set this period to align with their operational needs, but once established, it must remain consistent. Compensation for overtime applies to all hours worked over 40 during this defined workweek, regardless of whether employees are paid hourly, salaried, or on a piece-rate basis.

Exempt Employees

Some employees are exempt from overtime requirements based on their job responsibilities and salary. Common exemptions include:

Executives: Employees responsible for managing teams, making hiring decisions, and earning a salary above the FLSA threshold.
Administrative roles: Positions involving office or non-manual work that supports core business operations, such as finance managers or HR professionals.
Learned professionals: Positions requiring advanced education and expertise in fields like law, medicine, or engineering.

Employees must meet specific criteria to qualify for these exemptions. Misclassification can lead to significant penalties, back pay obligations, and legal challenges. Employers should regularly review job descriptions and salary levels to confirm compliance with both Vermont and federal laws.

Maintaining accurate time records for non-exempt employees is key. Proper documentation ensures employees receive correct overtime pay and protects employers during audits or disputes.

Wage Payment and Final Pay Requirements

Vermont wage payment laws are clear and specific to protect employees and provide consistency for employers. Staying compliant ensures payroll processes run smoothly and avoids unnecessary disputes.

Pay Frequency

Employers are required to pay employees on a regular, predictable schedule. Vermont law allows payments to be made weekly, biweekly, or semimonthly. Employers must communicate the chosen schedule to employees and follow it without interruption.

Each payday must include all wages earned through the end of the most recent pay period. This includes regular earnings, overtime, commissions, or bonuses as applicable. Employers should ensure payroll systems are set to align with these legal timelines to avoid delays or errors.

Final Pay for Terminated Employees

Vermont sets strict deadlines for issuing final pay when an employee separates from a company.

Terminated employees: Employers must pay all outstanding wages within 72 hours of discharging an employee. This includes any earned wages, overtime, or accrued vacation pay if the company policy classifies vacation as earned wages.
Resigning employees: Final wages are due by the next scheduled payday for employees who voluntarily resign.

Employers should use the same payment method the employee regularly receives unless other arrangements are mutually agreed upon. Documenting the amount and payment date is critical to avoid disputes.

Deductions

Deductions from wages are tightly regulated under Vermont law. Employers can only withhold pay in specific situations.

Legally required deductions: Taxes, Social Security, wage garnishments, or child support payments must be deducted as mandated by law.
Employee-authorized deductions: Written authorization is required for deductions like health insurance premiums, retirement contributions, or union dues.
Permitted deductions: Employers may deduct costs such as uniforms or advances, but only when employees provide written consent.

Even with allowed deductions, wages cannot drop below Vermont's minimum wage. Keeping detailed records of all deductions is necessary to demonstrate compliance and protect against potential claims.

Child Labor Laws

Vermont’s child labor laws are clear and specific, designed to protect minors while ensuring employers meet legal requirements. Employers hiring workers under 18 must follow strict guidelines regarding hours, tasks, and permits. Missteps can lead to penalties and disrupt operations, so understanding the details is important.

Minors Under 16

Workers under 16 face strict limitations to safeguard their well-being. They cannot perform hazardous jobs such as operating heavy machinery, working with power-driven equipment, or handling dangerous chemicals. These restrictions focus on preventing injuries and ensuring safety in the workplace.

Scheduling restrictions apply during the school year to prioritize education. Vermont law limits minors under 16 to:

Three hours per day on school days.
Eight hours per day on non-school days.
18 hours per week during school weeks.
40 hours per week during non-school weeks.

Work hours must fall between 7 a.m. and 7 p.m. during the school year. From June 1 to Labor Day, minors may work until 9 p.m. Employers must plan schedules carefully to remain compliant.

Minors Aged 16–17

Teenagers aged 16 and 17 have more flexibility but still face restrictions for high-risk tasks. They cannot perform roles involving roofing, excavation, or operating certain heavy equipment. Employers are responsible for ensuring job assignments align with Vermont's laws.

While there are fewer limits on hours for this age group, work must not interfere with school attendance. Employers should monitor duties and schedules closely to avoid violations.

Required Work Permits

Hiring minors typically requires a work permit to confirm the job complies with Vermont labor laws. Permits are issued by the Vermont Department of Labor or the minor's school and verify that employment conditions are appropriate for the individual's age.

Employers must keep records of permits and the minor's age as part of their compliance documentation. Missing or incomplete paperwork can lead to fines or legal action. Always check current requirements with the Vermont Department of Labor to stay up to date.

Required Posters and Recordkeeping

Employers in Vermont have clear obligations to display workplace posters and maintain records to comply with labor laws. These requirements are straightforward but non-negotiable, with specific rules in place for visibility and retention periods. Staying organized and proactive is key to avoiding compliance issues.

Mandatory State Posters

Vermont law requires employers to post labor law notices in locations where employees can easily see them. Among the required postings is the updated 2025 minimum wage poster, which outlines the current hourly rates for both standard and tipped workers.

Employers must also display other state-specific notices, such as:

Earned Sick Time Act notice: Details on accrual and use of paid sick leave.
Child labor law poster: Information on age restrictions and prohibited tasks for minors.
Parental and family leave summary: A breakdown of eligibility and protections for employees.
Workplace safety notice (VTOSHA): Instructions on reporting hazards and understanding safety rights.

These posters must be updated whenever regulations change and placed in high-traffic areas like break rooms or near time clocks. For remote employees, providing digital access to mandatory postings is a practical solution to ensure compliance.

Federal Posters

In addition to state requirements, federal labor laws mandate specific posters for workplaces. Key examples include:

FLSA notice: Covers minimum wage, overtime pay, and child labor provisions.
OSHA workplace safety poster: Explains employees' rights and employer responsibilities for a safe work environment.
EPPA notice: Details protections against improper use of polygraph testing.
FMLA summary: Outlines unpaid leave rights for eligible employees.

Federal posters must be displayed prominently alongside state notices. Employers should verify that all postings are up to date and meet visibility requirements to avoid penalties.

Recordkeeping

Accurate and organized employment records are a legal requirement in Vermont. Employers must keep payroll, hours worked, and tip records for at least three years. This documentation helps demonstrate compliance during audits or disputes.

Records should include:

Employee information: Name, address, Social Security number, job title, and hourly or salary rate.
Work hours: Daily and weekly logs, including overtime hours.
Wage details: Gross pay, deductions, and net pay for each period.
Tip records: For tipped workers, documentation of tips earned and any employer contributions to meet the standard minimum wage.

Maintaining records in a clear and accessible format ensures employers can respond quickly to inquiries or audits. Digital systems are often acceptable as long as records are complete, legible, and readily available when needed. Staying diligent with recordkeeping protects both the employer and employees.

Enforcement and Penalties

The Vermont Department of Labor's Wage and Hour Division enforces compliance with state wage laws, while the U.S. Department of Labor oversees federal requirements. Both agencies actively investigate complaints and ensure employers adhere to wage and hour obligations.

Potential Penalties

Non-compliance with wage laws can lead to serious consequences for employers. Penalties typically reflect the nature and extent of the violation.

Unpaid wages: Employers must pay back wages owed to employees, including overtime and any shortfalls in tipped earnings.
Civil fines: Each violation can incur significant fines, with higher amounts for repeat offenses.
Legal costs: Employers may need to cover employees' legal fees if a lawsuit is required to recover unpaid wages.

Ignoring compliance issues or delaying corrective actions often results in increased fines and additional legal risks.

Investigations

When an investigation begins, employers are required to provide full cooperation. Labor officials may request detailed payroll records, time logs, or employee payment histories to verify compliance. Delayed or incomplete documentation can escalate the situation and lead to harsher penalties.

To prepare for an investigation:

Ensure payroll and timekeeping systems are accurate and updated regularly.
Keep detailed records of employee hours, wages, and tips for at least three years.
Address discrepancies immediately to prevent further violations.

Prompt action and transparent communication during an investigation can demonstrate a commitment to compliance and potentially reduce penalties. Employers should regularly review their processes to identify and correct gaps before they lead to enforcement actions.

Best Practices for Compliance

Compliance with Vermont's minimum wage laws requires a structured and proactive approach. Employers must focus on accuracy, consistency, and staying informed to meet state requirements and protect their organizations.

Conduct Regular Wage Audits

Reviewing employee classifications and pay rates ensures compliance with current laws. Confirm that exempt and non-exempt employees are properly categorized based on their specific job duties and salaries. Misclassifications can lead to unpaid wages or legal penalties.

Additionally, check that hourly employees are paid Vermont's updated minimum wage of $14.01 per hour and that tipped employees meet the full hourly wage when tips are included. Address discrepancies immediately to avoid further complications.

Implement Accurate Time-Tracking Systems

Reliable timekeeping is essential for payroll accuracy and compliance with overtime laws. Use systems that automatically track hours, flag overtime, and integrate with payroll. Ensure employees can log work hours easily, whether through mobile devices, desktop platforms, or physical kiosks. Maintain these records for at least three years to satisfy Vermont's retention requirements.

Stay Informed on Legislative Changes

Vermont adjusts its minimum wage annually, typically linked to the Consumer Price Index or a capped increase. Subscribe to updates from the Vermont Department of Labor to stay ahead of changes. Employers should review adjustments each fall to prepare for new rates effective January 1. Automating compliance updates through HR software can also save time and reduce errors.

Provide Clear, Written Policies

Employees need a thorough understanding of pay, leave, and other workplace rules. Create written policies covering minimum wage rates, tipped wage requirements, overtime eligibility, and leave options like FMLA or sick leave. Ensure employees receive this information during onboarding and make updates readily available through handbooks or online portals.

Consult Professionals for Complex Issues

For more challenging compliance questions, seek guidance from legal counsel or HR experts. This is particularly important for classification disputes, tipped wage calculations, or addressing audits and wage claims. Professional advice can help resolve issues efficiently and minimize risk.

Note: Employers can streamline compliance efforts by utilizing HR systems that automate wage calculations, generate compliance reports, and provide alerts for legislative updates.

Navigating Vermont's minimum wage laws and leave requirements can be complex, but staying compliant is essential for your business and employees. We hope this guide has provided the information you need to understand your obligations and make informed decisions. If you're looking for a comprehensive HR solution to streamline compliance, payroll, and benefits, book a demo with GoCo today and see how we can help you thrive.