Delaware Labor Laws for Business Owners

Delaware is known for having a favorable business climate, and it is particularly popular for business incorporation. Business owners and investors from around the world set up companies in Delaware when they want to enter the US market. The state does not have sales tax and state-level corporate income tax for companies that operate outside of the state. This makes it an attractive location for businesses looking to minimize tax liabilities.

Minimum Wage Mandates

The minimum wage in Delaware is $15.00 per hour as of January 1, 2025. This rate remains unchanged for 2026, as it was the final step in the scheduled series of increases that began in 2022. Delaware does not currently have an automatic cost-of-living adjustment for minimum wage.

The minimum cash wage for tipped employees is $2.23 per hour. Employers may claim a tip credit, but the employee's combined tips and cash wages must equal at least $15.00 per hour. If tips do not bring the employee's total earnings to the full minimum wage, the employer must make up the difference.

Overtime Rules

Overtime rules in Delaware are governed by the federal law Fair Labor Standards Act (FLSA).

Non-exempt employees in Delaware are entitled to overtime pay for the hours worked beyond 40 hours in a week. The overtime pay is calculated at 1.5 times the regular hourly pay.

Meal and Rest Breaks

Delaware state follows the Fair Labor Standards Act (FLSA) which does not require employers to provide meal or rest breaks. Employers are free to offer breaks that follow applicable guidelines.

Meal breaks can be unpaid if the employee is completely relieved of duties during the break. Otherwise, employer may have to compensate for the meal break.

The FLSA does not mandate employers to give rest breaks for adult employees. If employers choose to give short breaks, they must pay the employees for the break time.

It’s important for employers in Delaware to understand that while federal law does not mandate breaks, employers must comply with any collective bargaining agreements, employment contracts, or industry-specific regulations that may require breaks.

Employers who employ young workers need to follow federal child labor laws which require breaks for young workers.

Paid Leaves and time off rules in the state of Delaware

Delaware enacted the Healthy Delaware Families Act (HDFA), which established the Delaware Paid Family and Medical Leave Insurance Program. Contributions began January 1, 2025, and benefits became available starting January 1, 2026.

• Paid Family and Medical Leave: Under the HDFA, covered employees may take up to 12 weeks of parental leave and up to 6 weeks of leave for medical needs, family caregiving, or military qualifying exigencies per year.
• Wage Replacement: The program provides up to 80% of average weekly wages, capped at $900 per week (adjusted annually after 2027). The minimum weekly benefit is $100 per week.
• PTO Interaction: Employers can no longer require employees to exhaust accrued PTO, vacation, or sick leave before applying for HDFA benefits, per a 2025 amendment signed by Governor Matt Meyer.
• The Federal Family and Medical Leave Act (FMLA) is a federal law that allows eligible employees to take up to 12 weeks of unpaid, job-protected leave per year for qualifying family or medical reasons, such as the birth or adoption of a child, a serious health condition, or caring for a covered service member.
• Paid Sick Leave (Local Ordinances): Some local jurisdictions in Delaware, such as New Castle County and the City of Wilmington, have enacted local ordinances requiring employers to provide paid sick leave to employees. Employers should be aware of any applicable local regulations.
• Employer Policies: Many employers in Delaware provide paid time off (PTO) or vacation days as part of their employment policies. The availability and accrual of paid leave often depend on the employer’s policies, employment contracts, or collective bargaining agreements.

Exempt vs. Non-Exempt Classification

The classification of employees as exempt or non-exempt in Delaware is primarily governed by the Fair Labor Standards Act (FLSA).

Exempt Employees:

• Salary Basis Test: Exempt employees are typically paid on a salary basis, meaning they receive a fixed salary that is not subject to reduction based on the quality or quantity of work performed.
• Salary Level Test: Exempt employees must earn a minimum salary to qualify for exemption. The federal minimum salary threshold for exemption is $684 per week ($35,568 per year). Delaware follows the federal threshold.
• Duties Test: Exempt employees must perform specific job duties that fall into one of the FLSA’s exempt categories, such as executive, administrative, professional, or certain computer-related duties.

Non-Exempt Employees:

• Hourly Pay: Non-exempt employees are typically paid on an hourly basis and are entitled to overtime pay for hours worked beyond 40 hours in a workweek.
• Overtime Pay: Overtime pay for non-exempt employees is generally calculated at 1.5 times their regular rate of pay for each hour worked beyond 40 hours in a workweek.

Delaware has a graduated state income tax with rates ranging from 2.2% to 6.6%. For the 2026 tax year, new brackets apply under House Bill 13, which added higher brackets above $125,000 in taxable income.

Equal Pay Act

Delaware does not have a state-specific Equal Pay Act. Instead, employers must follow the federal legislation federal Equal Pay Act of 1963 under the Fair Labor Standards Act (FLSA).

Equitable Work:

The federal Equal Pay Act (EPA) prohibits wage discrimination based on sex, ensuring that employees of one sex are paid the same as employees of the opposite sex for equal work.

Exceptions to the equal pay is allowed in cases where the differences in pay arise from seniority systems, merit systems, systems that assess earnings based on quantity or quality of production, or other factors not related to employee’s sex.

Protection against Retaliation:

The Equal Pay Act explicitly prohibits employers from retaliating against employees who assert their rights under the act.

In addition to the EPA, employers must also adhere to Title VII of the Civil Rights Act of 1964 that prohibits discrimination based on race, color, religion, and national origin.

Rules for hiring and firing employees in Delaware

The state of Delaware follows the principle of employment-at-will. Under this principle, both the employer and the employee can terminate the employment relationship at any time and for any lawful reason, or for no reason at all, with some exceptions.

Employers should follow the following rules and guidelines when hiring and firing employees in Delaware:

Employment-At-Will: Delaware follows the employment-at-will principle. It allows employers to terminate employees with or without cause, and employees can resign from their positions at any time.

Anti-Discrimination Laws: Employers in Delaware must comply with federal anti-discrimination laws, including Title VII of the Civil Rights Act of 1964. It prohibits discrimination based on race, color, religion, sex, or national origin. Employers must also follow federal laws such as the Americans with Disabilities Act (ADA) and the Age Discrimination in Employment Act (ADEA).

Background Checks: Employers conducting background checks in Delaware have to comply with federal Fair Credit Reporting Act (FCRA), which governs the use of consumer reports for employment purposes.

Work Eligibility Verification: Employers in Delaware must comply with federal immigration laws, including completing Form I-9 to verify the work eligibility of employees.

Final Paychecks: The state of Delaware requires employers to provide employees with their final paychecks in a timely manner upon termination.

WARN Act: The federal Worker Adjustment and Retraining Notification (WARN) Act may apply to employers with 100 or more employees, requiring them to provide advance notice of plant closings or mass layoffs.

Retaliation Protections: Employees in Delaware are protected from retaliation for engaging in certain protected activities, such as reporting workplace violations or filing discrimination complaints.

It is important for employers to remain well-informed about changes in employment laws and to seek guidance from legal professionals to ensure compliance with the latest regulations. It’s advisable to establish clear and meticulously documented employment policies and procedures to aid employers in complying with the labor laws.