Ring in the New Year with Minimum Wage, Tipped and Exempt Employee Pay Increases

UPDATES: Since we published this article, the following updates occurred.

  • We have updated the 2022 rate information for Palo Alto, California. Originally, the city announced a $16.25 rate, but in a revised announcement uses a $16.45 rate.
  • Michigan announced that in 2022 its minimum wage will be $9.87 per hour and the minimum cash wage for tipped employees will be $3.75 per hour
  • In Albuquerque, New Mexico, the city announced that, for 2022, the minimum wage will be $11.50 per hour (the state rate) and the minimum cash wage for tipped employees will be $6.90 per hour

Minimum wage laws can affect businesses of all sizes, whether operating nationwide, in multiple jurisdictions, or only in one state, county, or city. To help manage this challenge, below we provide a rates-only update that details scheduled state- and local-level wage increases that will occur on January 1, 2022 (or December 31, 2021 in New York) so employers can determine the minimum amount they must pay non-exempt, tipped, and certain exempt employees. Although additional rate changes will occur later in 2022, we limit our focus in this article to those that will ring in the new year, and will cover later updates via our mid-year rates article.

Fall 2021 Changes: Before we look forward to 2022, let’s take a quick look at some notable rate-related changes that occurred or took effect in the second half of 2021 (after we published our 2021 mid-year update):

  • On June 20, Maine LD 1489 was enacted without the governor’s signature, and, effective October 18, 2021, increases (in 2022, 2023, and annually afterwards) the amount of tips an employee must receive to be a “service employee,” which affects whether employers can count tips toward the minimum wage. On January 1, 2022, the threshold increases from $30 to $100 per month.
  • On June 30, Colorado’s Department of Labor & Employment issued Interpretive Notice & Formal Opinion #1A, in which it explained how it translated the required weekly minimum salary for overtime-exempt executives, administrative and professional employees into an annual amount: “[A]nnual salary equivalents are based on 2080 hours worked over the course of 52 weeks (assuming 40 weekly hours), and are rounded to the nearest dollar.”
  • In Maine, on July 6, the Supreme Judicial Court held that the voter-approved November 3, 2020 ballot measure establishing an emergency minimum wage (1.5 times the minimum wage) in Portland was constitutional but would not take effect until January 1, 2022.
  • On July 9, Pennsylvania’s governor signed HB 336, which, effective September 7, 2021, repeals regulations concerning the administrative, executive, and professional exemptions that included a minimum salary or fee amount that exceeded the rate under federal law.
  • On July 19, Delaware enacted SB 15, which gradually increases the minimum wage, starting on January 1, 2022 through 2025 (when it will be $15 per hour).
  • On July 23, New Hampshire enacted SB 137, a "trigger law" (effective date TBD) that provides, if the federal minimum wage increases, under state law the list of tipped employees for whom an employer can count tips toward payment of the minimum wage will expand to include cigar bar employees, and the tipped employee minimum cash wage (MCW) would change from 45% of the minimum wage to $3.27 or the federal MCW (whichever is greater).
  • At its July 27 meeting, the Port of Seattle adopted Resolution 3789, requiring employers that provide goods or services at SeaTac Airport that are engaged in preparing food or beverages to be served in-flight by an airline from facilities located on property owned by the Port in SeaTac comply with the City of SeaTac’s minimum wage ordinance (and worker retention provisions).
  • On August 1, Connecticut’s minimum wage and minimum cash wage increased by $1.00 per hour to $13 and $6.63 or $4.77 (depending on whether the employee is a tipped employee in a hotel / restaurant or a bartender, respectively).
  • On October 5, 2021, Alaska’s Department of Labor & Workforce Development announced that the minimum wage (and, as a result, various exempt employee pay amounts) would not increase in 2022 because the consumer price index for annual adjustments decreased 1.1%.
  • Published October 28 and effective December 28, 2021, the U.S. Department of Labor’s final “dual jobs” rule resurrects the so-called “80/20 Rule” that governs how tipped employees must be paid under the Fair Labor Standards Act (which can affect when an employer can apply a tip credit toward its minimum wage payment obligation).
  • At a November 2 election, voters in Tucson, Arizona appear to have approved a ballot measure creating a minimum wage ordinance (and establishing numerous other wage payment laws). Beginning April 1, 2022 (no joke), the measure will require a $13.00 minimum wage, and for tipped employees a $3.00 tip credit and $10.00 minimum cash wage. There will be future set increases in 2023 through 2025, with annual adjustments starting in 2026.

Minimum Wage, Minimum Cash Wage & Tip Credit Changes: Directly below we highlight states, counties, and cities where the minimum wage that generally applies1 will increase on/around January 1, 2022, along with the amount the rate changes. Note, however, that if a rate will not change, we do not include that information. Additionally, for tipped employees, we chart changes to the minimum cash wage such employees must receive, and the maximum tip credit employers may apply toward the minimum wage. Due to unique circumstances involving local minimum wages in New Mexico, and for tipped employees in New York, we discuss those requirements separately, after this chart.

Jurisdiction

Minimum Wage

Minimum Cash Wage

Maximum Tip Credit

Arizona

$12.80
(65₵)

$9.80
(65₵)

$3.00
(No Change)

-Flagstaff

$15.50
(50₵)

$13.00
($1.00)

$2.50
(-50₵)

California
(≥26 Employees)

$15.00
($1.00)

Same as MW
(No Change)

Prohibited
(No Change)

California
(≤25 Employees)

$14.00
($1.00)

Same as MW
(No Change)

Prohibited
(No Change)

-Belmont

$16.20
(30₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Burlingame

$15.60
(60₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Cupertino

$16.40
(75₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Daly City

$15.53
(53₵)

Same as MW
(No Change)

Prohibited
(No Change)

-East Palo Alto

$15.60
(60₵)

Same as MW
(No Change)

Prohibited
(No Change)

-El Cerrito

$16.37
(76₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Half Moon Bay

$15.56
(56₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Hayward
(≥26 Employees)

$15.56
(56₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Hayward
(≤25 Employees)

$14.52
(52₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Los Altos

$16.40
(75₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Menlo Park

$15.75
(50₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Mountain View

$17.10
(80₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Novato
(≥100 Employees)

$15.77
(53₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Novato

(26-99 Employees)

$15.53
(53₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Novato
(≤25 Employees)

$15.00
($1.00)

Same as MW
(No Change)

Prohibited
(No Change)

-Oakland (General)

$15.06
(70₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Oakland
(Hotel – No Benefits)

$21.84
($1.02)

Same as MW
(No Change)

Prohibited
(No Change)

-Oakland
(Hotel – Health Benefits2)

$16.38
(70₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Palo Alto

$16.45
(80₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Petaluma

$15.85
(65₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Redwood City

$16.20
(58₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Richmond3

$15.54
(33₵)

Same as MW
(No Change)

Prohibited
(No Change)

-San Carlos

$15.77
(53₵)

Same as MW
(No Change)

Prohibited
(No Change)

-San Diego

$15.00
($1.00)

Same as MW
(No Change)

Prohibited
(No Change)

-San Jose

$16.20
(75₵)

Same as MW
(No Change)

Prohibited
(No Change)

-San Mateo

$16.20
(58₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Santa Clara

$16.40
(75₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Santa Rosa

$15.85
(65₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Sonoma
(≥26 Employees)

$16.00
($1.00)

Same as MW
(No Change)

Prohibited
(No Change)

-Sonoma 2
(≤25 Employees)

$15.00
($1.00)

Same as MW
(No Change)

Prohibited
(No Change)

-South San Francisco

$15.55
(31₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Sunnyvale

$17.10
(80₵)

Same as MW
(No Change)

Prohibited
(No Change)

-West Hollywood (Hotel & Related4)

$17.64
(New)

Same as MW
(No Change)

Prohibited
(No Change)

-West Hollywood (≥50 Employees)

$15.50
(New)

Same as MW
(No Change)

Prohibited
(No Change)

-West Hollywood (≤49 Employees)

$15.00
(New)

Same as MW
(No Change)

Prohibited
(No Change)

Colorado

$12.56
(24₵)

$9.54
(24₵)

$3.02
(No Change)

-Denver

$15.87
($1.10)

$12.85
($1.10)

$3.02
(No Change)

Delaware

$10.50
($1.25)

$2.23
(No Change)

$8.27
($1.25)

Illinois

$12.00
($1.00)

$7.20
(60₵)

$4.80
(40₵)

-Cook County

$13.00
(No Change)

$7.205
(60₵)

$5.80
(-60₵)

Maine

$12.75
(60₵)

$6.38
(30₵)

$6.37
(30₵)

-Portland

$13.00
(85₵)

$6.50
(42₵)

$6.50
(43₵)

-Rockland

$13.00
(85₵)

$6.50
(42₵)

$6.50
(43₵)

Maryland
(≥15 Employees)

$12.50
(75₵)

$3.63
(No Change)

$8.87
(75₵)

Maryland

(≤14 Employees)

$12.20
(60₵)

$3.63
(No Change)

$8.57
(60₵)

Massachusetts

$14.25
(75₵)

$6.15
(60₵)

$8.10
(15₵)

Michigan

TBD6

TBD

TBD

Minnesota
(≥$500K Gross Sales)

$10.33
(25₵)

Same as MW
(No Change)

Prohibited
(No Change)

Minnesota

(Others7)

$8.42
(21₵)

Same as MW
(No Change)

Prohibited
(No Change)

Missouri

$11.15
(85₵)

$5.575
(42.5₵)

$5.575
(42.5₵)

Montana

$9.20
(45₵)

Same as MW
(No Change)

Prohibited
(No Change)

New Jersey
(General)

$13.00
($1.00)

$5.13
($1.00)

$7.87
(No Change)

New Jersey
(Small or Seasonal)

$11.90
(80₵)

See General8

See General

New Jersey
(Farm)

$11.05
(61₵)

Not applicable

Not applicable

New Jersey
(Long-Term Care Facility Direct Care)

$16.00
($1.00)

Not applicable

Not applicable

New Mexico

$11.50
($1.00)

$2.80
(25₵)

$8.70
(75₵)

New York

See Below Section

Ohio

$9.30
(50₵)

$4.65
(25₵)

$4.65
(25₵)

Puerto Rico

$8.50

($1.25)

$2.13
(No Change)

$6.37
($1.25)

Rhode Island

$12.25
(75₵)

$3.89
(No Change)

$8.36
(75₵)

South Dakota

$9.95
(50₵)

$4.975
(25₵)

$4.975
(25₵)

Vermont

$12.55
(80₵)

$6.28
(40₵)

$6.27
(40₵)

Virginia

$11.00
($1.50)

$2.13
(No Change)

$8.87
($1.50)

Washington

$14.49
(80₵)

Same as MW
(No Change)

Prohibited
(No Change)

-SeaTac (Hospitality & Transportation)

$17.53
(96₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Seattle (Sch. 1 Minimum Wage)

$17.27
(58₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Seattle (Sch. 2 Minimum Wage)

$15.75
(75₵)

Same as MW
(No Change)

Prohibited
(No Change)

-Seattle (Sch. 2 Minimum Hourly Compensation)

$17.27
(58₵)

Same as MW
(No Change)

Prohibited
(No Change)

New Mexico

In unincorporated Bernalillo County, the local ordinance requires the city to adjust the minimum wage rate annually based on consumer price index changes. For 2021, the city announced an adjusted rate that was less than what state law requires, and said online that state law superseded the ordinance. For 2022, the rate, once adjusted for consumer price index changes, also would continue to be less than what state law provides, which likely explains why Bernalillo County has not announced an adjusted rate for 2022, so employers in Bernalillo County should continue to follow state law regarding minimum wage requirements.   

Las Cruces, however, takes a different approach. Like Bernalillo County, the local ordinance expressly sets the applicable rate as the prior year’s local rates with a CPI adjustment. But in the announcements for 2021 and 2022, the city says, rather than use the CPI-adjustment the ordinance requires (like Bernalillo County did), it would use the state minimum wage rate as its local rate, which then affects the local minimum cash wage rate for tipped employees (40% of the adjusted local rate). For 2022, the announced minimum wage, minimum cash wage, and tip credits are, respectively, $11.50 ($1.00), $4.60 (40₵), and $6.90 (60₵).

In 2021, Albuquerque took an approach similar to that of Las Cruces. At the time of publication, it has not made a 2022 announcement, so it is unclear whether it will continue on this path or reexamine the situation and take a position akin to Bernalillo County’s in 2021.

Finally, in the City of Santa Fe, a slightly different situation exists. Unlike Albuquerque, Bernalillo County, and Las Cruces, on January 1, 2022, the minimum wage rate under its local law will (continue to) exceed the rate under state law; however, because the local ordinance sets a minimum wage rate only, and does not discuss a minimum cash wage or maximum tip credit, state law fills this gap, so to speak, because it sets a minimum cash wage for tipped employees.  That rate will increase on January 1, 2022, meaning, on January 1, 2022, the Santa Fe minimum wage, minimum cash wage, and maximum tip credit will be, respectively, $12.32 (No Change), $2.80 (25₵), and $9.52 (-25₵). Note that these numbers could change a few months later, on March 1, 2022, when the city annually adjusts its minimum wage rate.

New York

Because New York tipped employee standards can be complicated, we give the Empire State its own section. On December 31, 2021, half of the state’s minimum wage rates will increase.9 Outside the Hospitality Wage order, and for fast food workers, state law prohibits tip credits, so employers must pay employees the full minimum wage. Under the Hospitality Wage Order, however, employers can continue to apply a tip credit, but standards differ depending on whether the employee is a “service employee” or a “food service worker.”

Employers must directly pay “service employees” and “food service workers” at least the Minimum Cash Wage and cannot claim a tip credit that exceeds the Maximum Tip Credit. Additionally, for service employees, employers’ ability to claim the tip credit depends on an employee’s weekly tip average equaling at least the hourly Tip Threshold and their direct wage plus tips equaling or exceeding the minimum wage.

 

Nassau, Suffolk & Westchester Counties

Remainder of State

Minimum Wage

$15.00
($1.00)

$13.20
(70₵)

Service Employee

Minimum Cash Wage

$12.50
(85₵)

$11.00 (Proposed)
(65₵)

Maximum Tip Credit

$2.50
(15₵)

$2.20 (Proposed)
(10₵)

Tip Threshold (Generally)

$3.25
(20₵)

$2.85 (Proposed)
(15₵)

Tip Threshold (Resort Hotels)

$8.40
(55₵)

$7.40 (Proposed)
(40₵)

Food Service Worker

Minimum Cash Wage

$10.00
(65₵)

$8.80 (Proposed)
(45₵)

Maximum Tip Credit

$5.00
(35₵)

$4.40 (Proposed)
(25₵)

Exempt Employees

Executive, Administrative and/or Professional Employees: The following states have pay requirements that are: 1) changing10 on January 1, 2022, along with the amount the rate changes; and 2) will exceed the minimum amount employers must pay exempt executive, administrative, and professional employees under the federal Fair Labor Standards Act (FLSA).

Jurisdiction

Weekly Salary

Monthly Salary

Annual Salary

Executive, Administrative & Professional

California (≥26 EE)

$1,200
($80)

$5,200
($346.66)

$62,400
($4,160)

California (≤25 EE)

$1,120
($80)

$4,853.34
($346.67)

$58,240
($4,160)

Colorado11

$865.38
($86.53)

$3,750
($375)

$45,00012
($4,500)

Maine13

>735.57
($34.61)

>$3,187.50
($160)

>$38,250
($1,800)

Washington (≥51 EE)

$1,014.30
($56)

$4,395.30
($242.66)

$52,743.60
($2,912)

Washington (≤50 EE)

$1,014.30
($192.90)

$4,395.30
($835.90)

$52,743.60
($10,030.80)

Executive & Administrative

Suffolk & Westchester Counties, NY

$1,125
($75)

$4,875
($325)

$58,500
($3,900)

Remainder of State, NY (Proposed)

$990.00
($52.50)

$4,290
($227.50)

$51,480
($2,730)

Where Minimum Wage Applies to White Collar Employees: In various states, executive, administrative, or professional employees are exempt from state overtime requirements, but not exempt from state minimum wage requirements, so they must earn at least the applicable minimum wage for each hour worked in a workweek, and on January 1, 2022 the minimum wage in some of these states (statewide and/or locally) will increase: Arizona; Colorado; Illinois; Massachusetts; New Jersey; South Dakota; and Virginia. Additionally, in a handful of states, including Arizona, where state and local minimum wage rates will increase on January 1, 2022, outside sales employees are not exempt from state minimum wage requirements.

Computer Employees: In California, certain computer software employees are exempt from state overtime requirements if they receive in 2022 a minimum hourly rate of $50 (an increase of $2.52), a minimum monthly salary amount of $8,679.16 ($436.84), or a minimum annual salary amount of $104,149.81 ($5,242.11). In Colorado, employees in highly technical computer-related occupations must receive at least the lesser of the applicable salary noted above or hourly pay that in 2022 is at least $28.92 (35₵). In Washington State, exempt computer employees paid on an hourly basis must be paid $50.72 (an increase of $2.80 for employers with 51 or more employees, and $13.07 for employers with 50 or more employees).

Medical Employees: California law also provides that licensed physicians and surgeons are exempt from state overtime requirements if in 2022 they receive a minimum hourly rate of $91.07 ($4.58).

Commissioned Employees Overtime Exception: To qualify under the FLSA’s 7(i) overtime exception, the regular rate of pay for an employee of a retail or service establishment must exceed one-and-a-half times the federal minimum wage, and more than half the employee’s compensation for a representative period (not less than one month) must represent commissions on goods or services. In the following states with January 1, 2022 rate changes, the 7(i)-type exception requires – in part – an employee’s pay to either equal or exceed one-and-a-half times the state minimum wage: California; Colorado; Minnesota; New York (possibly); and Washington.


See Footnotes

1 We do not discuss rates that potentially might apply that are lowere.g., San Jose, California’s “youth training” wage, or highere.g., Portland, Maine’s declared emergency minimum wage.

2 Must consist of payment of $5.46 per hour towards providing health care benefits for hotel employees and their dependents.

3 Some employers might be able to apply up to a $1.50 per hour credit if they provide qualifying medical benefits, but employers subject to the lower state minimum wage cannot claim the full credit because that would decrease an employee’s wage below the state minimum wage.

4 The definitions of “hotel employer” and “hotel worker” are very broad and not limited to “traditional” hotel employees. See Sebastian Chilco, Helene Wasserman, and Robert Blumberg, It’s Wild Wild West (Hollywood): Minimum Wage (to the Max), Paid (and Unpaid) Leave . . . and Service Charges, Littler Insight (Nov. 18, 2021).

5 Although the county minimum wage exceeds the state rate, the state minimum cash wage (MCW) exceeds the county rate, so, when this occurs, the county uses the state MCW as the county MCW, which, in turn, affects the county’s maximum tip credit.

6 For 2021, the state labor department announced the scheduled minimum wage increase would not occur due to unemployment levels. We are waiting for the department to announce what the 2020 rates will be. Note that, if a rate change does occur, it should be the minimum wage, minimum cash wage, and tip credit numbers that were supposed to take effect in 2021, which would be $9.87 (22¢), $3.75 (8¢), and $6.12 (14¢), respectively.

7 This rate applies to: 1) an enterprise whose annual gross volume of sales made or business done is less than $500,000 (excluding separately stated retail excise taxes); and 2) a covered hotel, motel, lodging establishment, or resort (Minn. Stat. § 157.15) that enters into a contract with an employee working on a summer work travel exchange visitor program nonimmigrant visa (“J visa”) that includes a provision that the employer will provide food or lodging benefit.

8 Although a lower minimum wage rate applies for employees of small or seasonal employers, the state labor department contends that, if an employer claims a tip credit, the general minimum wage rate applies.

9 The minimum wage will not change in New York City or statewide for fast food workers.

10 For example, amounts exceed the FLSA rate but will not change on January 1, 2022 in Alaska, or under the New York City rate under New York State law.

11 In addition to being paid a salary at these levels, the salary must be sufficient so that the employee earns at least the minimum wage for all hours worked in a workweek.

12 The weekly, monthly, and annual salaries noted in the regulations do not always perfectly align. For example, in 2022, the rates in the regulations are a few cents greater than what would happen if you multiplied the weekly salary by 52 (annual salary) and/or then divided the annual salary by 12 (monthly salary). For purposes of indicating the difference between the 2021 and 2022 rates, we base our calculation on the numbers the regulations use.

13 In its announcement concerning the 2022 adjusted minimum wage, the Maine DOL said, "Starting January 1, 2022, the new minimum salary threshold is $735.59 per week, or $38,251 per year." 3,000 times the 2022 minimum wage of $12.75 per hour is $38,250 ($38,251 would exceed that amount, as it would be $38,250.01).

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.