As most employers are aware, the federal minimum wage rate increased to $5.85 on July 24, 2007.
As most employers are aware, the federal minimum wage rate increased to $5.85 on July 24, 2007. As discussed in our prior Legal Alert, the federal minimum wage will increase to $6.55 per hour on July 24, 2008, and $7.25 per hour on July 24, 2009. Employers who use the “tip credit” may continue to pay employees $2.13 per hour; however, they must ensure that the employees’ total compensation, including tips, meets the new required minimum wage.
The impact of the increase on a particular employer depends, in part, on the laws of the state in which the employer is located. In states that do not have minimum wage laws and those that tie their minimum wage rate to the federal rate, the applicable minimum wage generally increased to $5.85 per hour. Note that some states may tie their minimum wage rate to the federal rate, but may define coverage differently, so employers should check the laws of the specific state.
However, the impact of the increase may be different for employers in states that have a higher minimum wage rate than the new federal rate. Generally, where federal and state laws have different wage rates, the higher rate applies. For example, in Florida, employers who are covered by both the state minimum wage law and the federal law generally must pay employees the higher state minimum wage rate of $6.67 per hour ($3.65 per hour plus tips for tipped employees).
Other states that have a higher minimum wage rate than the new federal rate of $5.85 per hour are:
Alaska ($7.15); Arizona ($6.75); Arkansas ($6.25); California ($7.50); Colorado ($6.85); Connecticut ($7.65); Delaware ($6.65); District of Columbia ($7.00); Hawaii ($7.25); Illinois ($7.50); Iowa ($6.20); Maine ($6.75 - will increase to $7.00 on October 1, 2007); Maryland ($6.15); Massachusetts ($7.50); Michigan ($7.15); Minnesota ($6.15) (for employers with annual receipts of $625,000 or more; $5.25 for employers with annual receipts of less than $625,000 – if these employers are covered by the FLSA, they must comply with the increased minimum wage rate); Missouri ($6.50); Montana ($6.15) ($4.00 for employers with $110,000 or less in gross annual sales); New Jersey ($7.15); New York ($7.15); North Carolina ($6.15); Ohio ($6.85); Oregon ($7.80); Pennsylvania ($7.15); Rhode Island ($7.40); Vermont ($7.53); Washington (7.93); West Virginia ($6.55); and Wisconsin ($6.50). New Hampshire’s minimum wage rate is tied to the federal minimum wage rate and increased July 24; however, it is scheduled to increase again on September 1, 2007 (to $6.50 per hour).
Clearly, more employers will be impacted by the increase to $6.55 per hour in 2008 and $7.25 per hour in 2009 than the increase implemented this year, since the 2008 and 2009 rates will be higher than many state minimum wage rates.
The impact of the increase in the federal minimum wage rate is particularly complicated in some states. For example, Nevada’s state minimum wage rate is $5.30 per hour for employers who make a qualified health insurance plan available to employees. Employers who do not make such a plan available are required to pay $6.33 per hour. Thus, Nevada employers who pay the lower rate will be impacted by the increase in the federal minimum wage. Additionally, the state minimum wage rate is scheduled to increase on July 1 of each year, while the federal rate will increase on July 24 for 2008 and 2009. This means employers may be subject to two minimum wage increases a year until the federal increase is fully implemented. A chart of the dates of both Nevada and federal increases is available on the Las Vegas Chamber of Commerce web site.
Employers in other states could also experience more than one minimum wage increase per year until the federal increase is fully implemented, if those states have minimum wage increases scheduled that do not coincide with the federal increases.
Employers’ Bottom Line:
The impact of the increase in the federal minimum wage rate depends, in part, on the requirements of the state minimum wage laws to which an employer is subject. Thus, it is important for employers to be aware of the requirements of the federal wage and hour laws and any applicable state laws.
If you have any questions regarding the issues addressed in this Alert or any other labor or employment related issue, please contact the Ford & Harrison attorney with whom you usually work.