Stay Up-to-Date with US Minimum Wage Laws

ByContent Manager
minimum wage laws

Federal and state laws related to employee pay and minimum wage often change over time. And while a change to the federal minimum wage rate often attracts a ton of media attention, it can be easy for busy business owners to miss a major story. Changes to state or local policy can be even more challenging to track.

Despite the complications and confusion surrounding minimum wage laws in the United States, employers are expected to be compliant one hundred percent of the time. Even one small misstep – regardless of whether it was intentional or a simple oversight – can leave a business at risk for fines related to non-compliance or lawsuits brought on behalf of the impacted employees. For this reason, employers must be diligent about understanding all changes to avoid a lawsuit and minimize risk at their company.

Minimum Wage Basics

The term ‘minimum wage’ describes the lowest amount of money an employer can pay an employee per hour of working time. While employers are free to pay more than the minimum wage, they cannot legally pay less. And while this seems straightforward initially, there can often be multiple minimum wages in a single jurisdiction. The reason for this is because there is a federal minimum wage, but then states and local municipalities can adopt one too.

The federal minimum wage is the lowest standard minimum wage, and it applies to all employees in the United States. States and cities cannot legally adopt a minimum wage that is below the federal minimum wage. If the federal minimum wage is raised to the point higher than a state or city’s minimum wage, then the employer must apply the federal minimum wage to be legally compliant.

If the state or local minimum wage is higher than the federal minimum wage, the employer must pay that rate to comply with the laws. Therefore, a good rule of thumb for employers in areas with multiple minimum wage laws is to pay the highest rate. This strategy ensures that you are meeting all of the lowest thresholds and will keep you out of hot water regarding wage laws.

Changes to Minimum Wages

The US Department of Labor enforces the federal minimum wage, as regulated by the Fair Labor Standards Act. While a change to the federal minimum wage can occur at any time, it has not been increased since 2009. The current rate is $7.25 an hour. Since there are relatively few changes to the federal minimum wage, employers generally don’t have an issue complying with it.

State laws can be a bit more challenging. Nearly two-thirds (29) of the states in the country have adopted minimum wages that are higher than the federal minimum wage. And since it is a lot easier for states to make changes to their minimum wage rates, there can be multiple changes across a span of just a few years – unlike the federal minimum wage, which has remained the same for over a decade.

State minimum wages can range from about a dollar more than the federal minimum, like in Florida, where it is currently set at $8.65, to more than double the federal minimum wage, as it is in California, where the minimum wage for large employers is $14 an hour. And states frequently make changes to their state minimum wages. Using Florida as an example again, their minimum wage recently increased from $8.65 to $10 an hour on September 30, 2021. In fact, six states made adjustments to their minimum wages in 2021. The rate of potential changes is one aspect that can make it difficult for employers to stay current on their minimum wage understanding.

Another complicated facet of minimum wage law is that several states apply different minimum wages based on a company’s size. Examples of this include:

  • California: Employers with 25 or fewer employees are subject to a $13 an hour minimum wage, while those with more than 25 employees must comply with a $14 an hour minimum wage.
  • Maryland: The minimum wage for employers with 14 or fewer employees is $11.60; it is $11.75 for employers with 15 or more employees.
  • Minnesota: The minimum wage for employers with gross revenue of less than $500,000 is $8.21, whereas it is $10.08 for employers with revenue that exceeds the $500,000 threshold.
  • Nevada: In Nevada, the minimum wage is $9.75, but those companies that provide health insurance to employees may pay their employees $1 less than the minimum wage.
  • New Jersey: In this state, the minimum wage is $11.10 for seasonal employers and those with less than six employees. It is $12 for employers with more than six employees.

As you can see, following state minimum wage laws in these states can become complicated quickly. Additionally, Georgia and Wyoming allow employers to pay $5.15 if the Fair Labor Standards Act does not apply to them. This difference is below the federal minimum wage, but it is still legal, provided the employer meets the criteria for exemption from the Fair Labor Standards Act. Examples of exempted employers include those with fewer than two employees, independent contractors, and businesses with annual revenue less than $500,000 and do not engage in interstate commerce (among others). But knowing whether your business is exempted or not can become confusing.

For instance, the city of Seattle, Washington, has a set a minimum wage of $15 for employers with 500 or fewer employees who pay $1.69 per hour toward medical benefits and/or the employee earns $1.69 per hour in tips. The rate is $16.69 for employers with 5000 or fewer employers who do not pay $1.69 per hour toward medical benefits and/or the employees do not earn $1.69 per hour in tips. It is also $16.69 for employers with 501 or more employees.

As you can see, keeping up with minimum wage laws in your jurisdiction can get confusing quickly. Unfortunately, there is no easy way to track these changes without putting in a ton of effort and time researching the issue. Fortunately, CAHR Services can help your company stay compliant. Our experts are well-versed in minimum wage laws for employers across the state of California. Contact us today to learn more about how we can help you stay up to date and legally compliant when paying your employees.