A consistent trend in the US business environment over the past three years has been a shift from federal to state and local governments as the main source of regulatory pressure on employers. Even as federal regulations stall or are rolled back under the Trump administration, businesses are facing higher minimum wages, paid leave mandates, and other new regulations at the state and local level. This trend has continued so far in 2019. While the new Democratic majority in the House of Representatives plans to push for an increase in the federal minimum wage from $7.25 to (eventually) $15 an hour, their intent is largely to put political pressure on Republicans with regard to labor issues, and the effort is unlikely to bear much fruit as long as Republicans control the Senate and the White House.
Meanwhile, however, the patchwork of state and local wage floors is rising and growing more complex. Minimum wages are going up this year in at least 22 US states plus Washington, DC, as well as a number of cities and counties. Most of these increases reflect automatic increases or inflation indexing built into the states’ minimum wage laws, while a few are the result of legislation or referenda passed last year.
Most recently, Maryland and Illinois moved to raise their minimum wages to $15 an hour over the next several years. Under a bill passed by the Illinois legislature in February and signed by newly elected Governor J.B. Pritzker, that state’s pay floor will hit $15 in 2025. Maryland passed a bill that will raise the minimum wage to $15 by 2025 for businesses with 15 or more employees, and by 2026 for smaller organizations. Republican Governor Larry Hogan attempted to veto the bill, but lawmakers swiftly overrode Hogan’s veto last month. New Mexico governor Michelle Lujan Grisham signed legislation on April 1 that will raise that state’s minimum wage from $7.25 to $9 an hour next January 1, then incrementally each year to $12 in 2023. The New Mexico law retains a lower minimum wage for tipped employees, which will rise from $2.13 an hour to $3 by 2023, while teenagers enrolled in high school will also be paid a lower minimum wage of $8.50.
Many other states’ minimum wages are rising due to laws and referenda passed last year. In November, voters in Missouri and Arkansas approved ballot measures to raise the minimum wage: Arkansas’s hourly minimum rose from $8.50 to $9.25 on January 1, 2019 and will increase to $10 next year and $11 in 2021. Missouri’s increased from $7.85 to $8.60 at the start of the year, as part of a gradual increase to $12 an hour by 2023. After that, it will rise according to inflation (the Arkansas ballot measure did not index the minimum wage to inflation).
Last September, Michigan’s legislature adopted a proposal to increase the minimum wage that would have otherwise appeared on the ballot in November, exploiting a process in the state that allows it to circumvent referenda by adopting them as bills in the legislature. As originally written, the measure would have raised the pay floor in Michigan from $9.25 to $12 per hour by 2022 and indexed it to inflation beginning in 2023, while also guaranteeing tipped employees a $12 minimum wage by 2024. In a lame-duck session, however, the legislature amended the bill to instead raise the regular minimum wage to $12.05 and the tipped minimum wage $4.58 by 2030 (the legislature also passed a weakened version of a voter-initiated plan to guarantee paid sick leave). Under this amended schedule, signed into law by outgoing governor Rick Snyder in December, the pay floor rose to $9.45 at the start of this year. The group that developed the ballot measure has threatened to sue the state over this action and intends to put the original initiative to voters again in 2020.
Massachusetts also avoided a minimum wage ballot measure last year by passing a compromise bill in June that increases the state’s minimum wage to $15 by 2023, while also creating a new family and medical leave program and a sales tax holiday and eliminating time-and-a-half pay for retail employees on Sundays and holidays. The proposed referendum would have brought a $15 minimum wage in 2022 and indexed it to inflation thereafter, which the final bill does not. Under Massachusetts’ new law, the minimum raise increased from $11 to $12 an hour on January 1 and will increase in 75-cent increments each coming year until reaching $15. The law also raises the tipped minimum wage in Massachusetts from $3.75 to $4.35 this year, and then by 60-cent increments each year until it reaches $6.75 in 2023.
In Delaware, the state legislature passed bills last summer to increase the state’s minimum wage to $10.25 by 2021, while also establishing a lower “youth rate” and “training rate” for teenagers and new employees. The pay floor rose from $8.75 to $9.25 at the start of this year and will increase again to $9.25 on October 1. The youth rate applies to workers ages 14 through 17, while the training rate applies to adult workers during their first ninety days on a new job. These new categories are 50 cents below the regular minimum wage rate, so workers in these groups won’t see their minimum wage increase until October.
In 18 other states and the nation’s capital, the minimum wage is rising this year based on inflation or automatically scheduled increases required by laws or referenda passed in previous years. These states include Alaska, Arizona, California, Colorado, Florida, Maine, Minnesota, Montana, Nevada, New Jersey, New York, Ohio, Oregon, Rhode Island, South Dakota, Vermont, and Washington. The magnitude of the increases ranges from a 5-cent, inflation-based adjustment in Alaska to hikes of a dollar or more in states like California and New York. (For a state-by-state breakdown of these changes, Ogletree Deakins shareholder Charles E. McDonald published a handy table at the National Law Review in December.)
Most of these increases came into effect on January 1 (or December 31, 2018 in New York), but three are scheduled for July 1: in Nevada, Oregon, and Washington, DC. Nevada is set to announce minimum wage adjustments based on the inflation rate in the previous year this month. Meanwhile, a new bill introduced in the state legislature two weeks ago proposes to raise the minimum wage to $12 for workers who are not offered health insurance and $11 for those who are, in a series of 75 cent increments between 2020 and 2024.
Washington, DC, will increase its minimum wage from $13.25 to $14 on July 1. Voters in the capital approved a measure last June to gradually increase the $3.89 minimum wage for tipped employees to $15 an hour—equal to the general minimum wage—by 2025. Currently, employers are only required to ensure that employees’ total pay including tips exceeds the minimum wage. The restaurant industry objected to the measure and the city council decided to repeal it in October. A legal challenge was defeated in court in December, so the wage hike for tipped employees in Washington, DC, is off the table for now.
State laws in California, Minnesota, New York, Ohio, and Oregon prescribe different minimum wages for different employers based on size or geography. In California, the minimum wage rose on January 1 from $11 to $12 for employers with 26 or more employees, and from $10.50 to $11 for smaller employers. In Minnesota, large employers (defined as those with annual gross revenues of $500,000 or more) are required to pay a higher minimum wage than smaller employers. The rate for large employers rose on January 1 from $9.65 to $9.86 an hour, while the small-employer wage rose from $7.87 to $8.04. Minnesota also has a separate youth wage and training wage for new employees, which are equal to the small-employer minimum wage regardless of the size of the employer. Ohio’s state minimum wage rose on January 1 from $8.30 to $8.55 per hour for employers with annual gross receipts of more than $314,000 per year. Employees of smaller organizations and those under the age of 16 are subject to the federal minimum wage of $7.25.
In Oregon, the minimum wage will increase on July 1 from $12.00 to $12.50 in the three counties that make up metropolitan Portland, from $10.75 to $11.25 in counties classified as “standard,” and from $10.50 to $11.00 in counties classified as “non-urban.”
In New York, as of December 31, the minimum wage has increased from $13 to $15 an hour for employers of 11 or more employees in the five boroughs of New York City, and from $12 to $13.50 for employers in the city with 10 or fewer employees. The minimum also increased from $11 to $12 in Long Island and Westchester County and from $10.40 to $11.10 in the rest of the state. It will increase to $15 in Long Island and Westchester by 2021, and in other areas by a later date still to be determined. The minimum wage for tipped employees in New York also rose on December 31 from $4.35 to $5 for larger employers in New York City, from $4 to $4.50 for city organizations with 10 employees or fewer, from $3.50 to $4 in Long Island and Westchester, and from $2.90 to $3.60 in the rest of the state. Additionally, New York has a separate minimum wage schedule for fast food workers, which rose from $13.50 to $15 in New York City this year, and from $11.75 to $12.75 in the rest of the state.
City and county governments in various parts of the country are also continuing to raise minimum wages at the local level. Numerous California cities including Los Angeles, Santa Monica, San Francisco, and San Diego have local minimum wages higher than those of the state. On July 1, the local wage floor rises from $12 to $13 in Chicago, Illinois and from $11 to $12 elsewhere in Cook County, with inflation-based adjustments still to be determined for tipped employees. Also effective July 1, Montgomery County, Maryland will raise its minimum wage from $12.25 to $13 for organizations with more than 50 employees and from $12 to $12.50 for smaller businesses. Future scheduled increases will differentiate between employers with 11-50 employees and those with 10 or fewer. Minneapolis, Minnesota’s pay floor rises from $11.25 to $12.25 for employers of more than 100 people and from $10.25 to $11 for those with 100 employees or fewer.
In Albuquerque, New Mexico, the minimum wage increased based on inflation from $8.95 to $9.20, from $7.95 to $8.20 for employers that provide health care and/or child care benefits, and from $5.35 to $5.50 for tipped employees. The mayor of Philadelphia, Pennsylvania signed legislation in December that will increase the local minimum wage from $12.20 to $13.25 on July 1, and gradually to $15 per hour over the coming three years. Seattle, Washington raised its minimum wage on January 1 to $16 for companies with 500 or more employees worldwide and will no longer provide a lower minimum for those that provide medical benefits. For smaller employers, the minimum rises from $14 to $15 an hour, or from $11.50 to $12 if the employer contributes at least $3.00 per hour toward an employee’s medical benefits and/or reported tips.
The city of Miami Beach, Florida, however, will ultimately not get to hike its minimum wage under an ordinance passed in 2016, after the Florida Supreme Court dismissed an appeal in February against earlier rulings that the local increase was preempted by state law. A number of states with Republican-dominated governments have pushed ahead in recent years with laws that prohibit cities and localities from enacting their own minimum wages and other labor regulations like paid leave mandates. These preemption laws are controversial, however, and largely untested in court. In February, the Arizona Court of Appeals ruled that Arizona’s law preempting local benefit mandates was unconstitutional.
This post is published for informational purposes only and does not constitute legal advice or an opinion on the legal matters discussed within. Employers should consult their general counsel whenever they have questions pertaining to laws, regulations, or potential liabilities.