Executive Summary: As Democrats take over the House of Representatives this month, some will be pushing to increase the federal minimum wage, which has remained stagnant at $7.25 per hour for the past decade. Not content to wait for Congress, the “Fight for 15” movement has scored victories throughout the country by increasing wages locally. Many states and localities will be or have already begun raising the minimum wage incrementally until they reach $15. Against this shifting backdrop, employers with operations in multiple cities need to be aware of different minimum wage rates that may be applicable in certain localities, even if such rates differ from those in the rest of the state.
Recent History of the Minimum Wage: It was just six years ago that fast food workers, earning the federal minimum wage of $7.25 per hour, began demanding more than double that, when the Fight for 15 movement was born. Among those localities that have already adopted the $15 minimum wage, most are gradually phasing in increases over multiple years. New York City, which began an incremental increase in wages in 2014, reached the $15 rate on the last day of 2018 for employers with 11 or more employees. Other cities already imposing a $15 minimum wage for at least some workers within their borders include Seattle and San Francisco. Many others are considering measures to do the same. No state has yet implemented a statewide $15 minimum wage.
Although nearly half the states, especially in the southern part of the U.S., still adhere to the federal rate, an increasing number of municipalities and counties have sought to impose higher wage requirements, even if the states in which they are located do not. For example, Kansas City passed a measure implementing a $10 “living wage,” with gradual increases to $15 by 2022. (Missouri’s minimum wage of $7.85 increased to $8.60 on January 1, 2019, and will increase by 85 cents per year thereafter until it reaches $12.00 in 2023). However, Missouri law prohibits municipalities from imposing a higher wage requirement than the state. Thus, paying the higher “living wage” remains voluntary. FordHarrison previously reported on Missouri’s increasing minimum wage here: https://www.fordharrison.com/18-states-set-to-ring-in-the-new-year-with-minimum-wage-increases.
Moreover, in some instances, the applicable minimum wage varies in some localities, depending on how many workers are employed. This collage of inconsistent and constantly shifting laws is a potential minefield of liability for employers. As noted recently by the New York Times, “Connecticut’s minimum wage is $10.10, while in New Jersey it is $8.85.” Thus, by way of just one example, employers with operations across that tri-state area need to pay different minimum wage rates for New York City; Suffolk, Nassau, and Westchester Counties; the remainder of New York State; New Jersey; and Connecticut.
Further adding to an employer’s burden is the circumstance of a minimum wage employee in a large metropolitan area, like New York City, who may work in more than one minimum wage jurisdiction. If, for example, an employee works three days a week in New York City, making $15 per hour, but one day a week in New Jersey, and one day a week in Nassau County, the employer would have to keep track of three different wage rates. If that employee worked any overtime, the rate would have to be calculated based on the rate of the location in which the overtime hours were performed. As a practical matter, in such cases, it would be easier for the employer to simply pay the $15 minimum wage for all hours worked. Doing so would both avoid the cost and difficulty of keeping track of which hours were worked in which location, and would also reduce potential liability for underpayment.
Employers’ Bottom Line: The historically low unemployment rate, combined with recent decisions by some large retailers to increase the minimum wage for all of their employees to $15 per hour, will put further pressure on employers across all industries to increase the minimum pay for their workforce, regardless of whether the law requires them to do so.
In the near future, a $15 minimum wage will likely be the new reality for most, if not all employers, no matter where they do business. This will be due to the practical difficulty of keeping track of and administering ever-changing annual wage increases in different cities and states (which may go into effect on different dates), as well as increased competition from employers willing to pay a higher rate. The multiplicity of state and local laws affecting the minimum wage creates a legal thicket for employers with operations throughout the U.S. Due diligence now is advised to ward off potential lawsuits in 2019.
If you have any questions regarding this, or any other labor or employment issues, please feel free to contact the author of this Alert, Valerie K. Ferrier, Senior Associate in the New York Office of FordHarrison. She may be contacted at vferrier@fordharrison.com. You may also contact the FordHarrison attorney with whom you usually work.