U.S. Minimum Wage, Tipped, and Exempt Employee Pay Increases Will Heat Up This Summer (And Possibly Other Seasons)

UPDATES: Since we published the article originally:

  • We revised the minimum cash wage and maximum tip credit rates for Chicago and Cook County, Illinois, which were inadvertently reversed.
  • Hawaii's governor signed amendments to the minimum wage and minimum cash wage for tipped employees.

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, essentially, a rates-only update that summarizes scheduled state- and local-level wage increases throughout the summer and fall of 2022. Employers can use this information to determine the minimum amount they must pay non-exempt, tipped, and certain exempt employees. Before we chart out these rates, we briefly highlight some notable wage and hour developments that have occurred in 2022, and discuss the notable economic development that has affected, and likely will continue to affect, wage-hour law: inflation.

Pending or future legislation might change minimum wage, tipped, and exempt employee rates that will apply in 2022, so we recommend employers monitor legislative developments and consult with counsel to confirm rates did not change since publication. Also, please note that some – but not all – New York rates may also increase on December 31, 2022, but we will cover those New Year’s Eve rate changes in our annual end-of-year article later this year.

Notable 2022 Wage & Hour Developments

Foster City, CA: On May 16, 2022, this city in Northern California’s San Francisco Bay Area enacted a minimum wage ordinance that will become operative on July 1, 2022. Foster City will become the 40th city in the Golden State to enact a local minimum law that applies to private employers generally (rather than only to a specific industry or type of employer, like hotels).

Ohio: On April 6, 2022, amendments pushed through by the governor and legislature, effective July 6, 2022, limit an employer’s obligation to pay overtime for certain work-related tasks that occur outside of the workday, with some caveats.

Pennsylvania: On May 7, 2022, the Pennsylvania Department of Labor and Industry adopted a final rule, effective August 5, 2022, revising rules concerning: 1) tipped employees; and 2) the regular rate for overtime purposes.

Virginia: On April 11, 2022, Virginia’s legislature and governor rolled back the provisions of the Virginia Overtime Wage Act and realigned state overtime obligations and exemptions with the federal FLSA, effective July 1, 2022.

The Elephant in the Room: Inflation

As we predicted, and as further discussed below, inflation is having a noticeable effect on local minimum wage rates with mid-year annual adjustments. Moreover, because these local jurisdictions do not take a uniform approach concerning how they perform the adjustment calculation, some localities with identical July 2021 rates will have different rates come July 2022, and, over time, this could lead to greater rate disparities among cities and counties within the same geographic region.

Some employers might avoid this summertime heat wave of rate increases because they do not have operations, or send employees to perform work, in these localities. But that does not mean they are not sweating over how rates will look at the state level come January 1, 2023, especially if inflation rates do not slow. Currently, 10 states are scheduled to adjust their minimum wage rates on January 1, 2023 – Alaska, Arizona, Colorado, Maine, Minnesota, Montana, Ohio, South Dakota, Vermont, and Washington – and New York will adjust its minimum wage rate that applies outside of New York City and the counties of Nassau, Suffolk and Westchester on December 31, 2022. Moreover, in many of these jurisdictions, the minimum wage rate will affect the minimum salary employers must pay exempt executive, administrative, professional, and/or inside sales employees.

Additionally, widely reported is the expectation that the rate of inflation will trigger a provision under California law that will bring forward one year earlier than planned a CPI-related adjustment to the state’s minimum wage (and exempt employee) rate(s). Specifically, employers with 26 or more employees were expecting the minimum wage to remain $15 per hour in 2023, and those with 25 or fewer employees were expecting their hourly minimum rate to reach $15 by this date. However, California law provides that, if inflation exceeds seven percent during a specific period – as most expect it to – the state will forgo the preset $15 minimum wage rates for 2023 and instead adjust the $15 rate based on the rate of inflation or 3.5%, whichever is less. Most people expect the rate for employers of all sizes to increase to $15.50, which is a 3.5% adjustment rounded to the nearest dime. As noted, this will apply to California employers of all sizes, statewide. Something employers should monitor, however, is whether a proposed minimum wage ballot measure collects enough signatures to go before voters at the November 2022 election; if it does, and if it passes, those amendments would instead control the minimum wage (and exempt employee) rate(s) come January 1, 2023.

Minimum Wage Changes

In this section we highlight states, counties, and cities where the minimum wage in 2022 has increased or will increase. Additionally, in these jurisdictions, we examine the corresponding minimum cash wage (MCW) and tip credit (TC) rates for tipped employees. In certain jurisdictions – excluding, e.g., California, Minnesota, Nevada, Oregon – employers may be able to count tips an employee receives toward the minimum wage. In those jurisdictions that permit a tip credit allowance, if the direct wage and tips an employer pays an employee equals the minimum wage, an employer satisfies its minimum wage obligation, but, if the direct wage plus tips does not equal the minimum wage, an employer must pay the employee the difference.

First, we look at changes that occurred in 2022 before publication. After that, we focus on how the rates will change on July 1 in jurisdictions where the law itself establishes the rate(s) employers must pay employees. Then, we highlight July 1 rates in jurisdictions that annually adjust their rate due to changes to the consumer price index. We conclude this section with Florida, where preset rate changes will occur later in the fall.

Pre-July 1, 2022 Changes

Jurisdiction

Rate Change Date

Minimum Wage
(Amount of Increase)

Minimum Cash Wage
(Amount of Increase)

Maximum Tip Credit
(Amount of Increase)

Tucson, AZ1

April 1, 2022

$13.00
(20₵)

$10.00
(20₵)

$3.00
(No Change)

Howard County, MD

April 1, 2022

$14.00
(See Footnote)

$3.63
(See Footnote)

$10.37
(See Footnote)

Howard County, MD (Small Employer)2

April 1, 2022

$12.50
(See Footnote)

$3.63
(See Footnote)

$8.87
(See Footnote)

Santa Fe (City), NM

March 1, 2022

$12.95
(63₵)

$2.80
(No Change)

$10.15
(63₵)

Santa Fe (County), NM

March 1, 2022

$12.95
(63₵)

$3.88
(19₵)

$9.07
(44₵)

July 1, 2022 Changes

Pre-Set Rate Changes

Jurisdiction

Minimum Wage
(Amount of Increase)

Minimum Cash Wage
(Amount of increase)

Maximum Tip Credit
(Amount of Increase)

Foster City, CA

$15.75
(75₵ or $1.75)3

$15.75
(75₵ or $1.75)

Not Applicable

West Hollywood, CA (Non-Hotel) (≥50 EE)

$16.50
($1.00)

$16.50
($1.00)

Not Applicable

West Hollywood, CA (Non-Hotel) (≤49 EE)

$16.00
($1.00)

$16.00
($1.00)

Not Applicable

Connecticut (Hotel or Restaurant)

$14.00
($1.00)

$6.38
(No Change)

$7.62
($1.00)

Connecticut (Bartender)

$14.00
($1.00)

$8.23
(No Change)

$5.77
($1.00)

Chicago, IL (4-20 EE) $14.50
(50₵)
$8.70
(30₵)
$5.80
(20₵)

Montgomery County, MD (11-50 EE or ≥11 & Tax-Exempt, Home Health, or Community-Based Service Provider )

$14.50
(50₵)

$4.00
(No Change)

$10.50
(50₵)

Montgomery County, MD (≤10 EE)

$14.00
(50₵)

$4.00
(No Change)

$10.00
(50₵)

Minneapolis, MN (≥101 EE)

$15.00
(75₵)

$15.00
(75₵)

Not Applicable

Minneapolis, MN (≤100 EE)

$13.50
($1.00)

$13.50
($1.00)

Not Applicable

Saint Paul, MN (≥10,001 EE)

$15.00
($2.50)

$15.00
($2.50)

Not Applicable

Saint Paul, MN (101-10,000 EE)

$13.50
($1.00)

$13.50
($1.00)

Not Applicable

Saint Paul, MN (6-100 EE)

$12.00
($1.00)

$12.00
($1.00)

Not Applicable

Saint Paul, MN (≤5 EE)

$10.75
(75₵ or 42₵4)

$10.75
(75₵ or 42₵)

Not Applicable

Nevada (No Health Benefits Offered)

$10.50
(75₵)

$10.50
(75₵)

Not Applicable

Nevada (Health Benefits Offered)

$9.50
(75₵)

$9.50
(75₵)

Not Applicable

Oregon (Urban)5

$14.75
(75₵)

$14.75
(75₵)

Not Applicable

Oregon (General)

$13.50
(75₵)

$13.50
(75₵)

Not Applicable

Oregon (Nonurban)

$12.50
(50₵)

$12.50
(50₵)

Not Applicable

Changes Based on Consumer Price Index

Minimum Wage

To demonstrate how inflation is affecting annual adjustments, below we identify: 1) current and future wage rates; 2) whether the annual adjustment uses CPI-U (Consumers) or CPI-W (Workers); 3) the time period the jurisdiction uses when determining the applicable inflation rate; 4) the percentage by which the rate is changing (if the law caps how much the rate can increase, we note “Cap”); and 5) whether and how the jurisdiction “rounds” the adjusted figure to a nearest monetary decimal figure.

Jurisdiction

Current Rate

Adjusted Rate

CPI-U v. CPI-W

CPI Period

% Change (Appx.)

Rounding

Alameda, CA

$15.00

$15.75

Unspecified

Feb. 22 v. Feb. 21

5.00% (Cap)

N/A

Berkeley, CA

$16.32

$16.99

CPI-W

2021 v 2020

4.10%

N/A

Emeryville, CA

$17.13

$17.68

CPI-U

2021 v 20206

3.20%

N/A

Fremont, CA (≥26 EE)

$15.25

$16.00

CPI-W

Feb. 22 v. Feb. 21

5.00% (Cap)

Nearest multiple of 5 cents (Down)

Fremont, CA (≤25 EE)

$15.00

$16.007

See above

See above

See above

See above

Los Angeles (City), CA

$15.00

$16.04

CPI-W

Dec. 21 v. Dec. 20

6.90%

N/A

Los Angeles (City), CA (Hotels)8

$17.64

$18.17

CPI-U

2021 v. 2020

3.00% (Cap)

Nearest 1/10 of 1%

Los Angeles (County), CA

$15.00

$15.96

CPI-W

Nov. 21 v. Nov. 20

6.40%

N/A

Malibu, CA

$15.00

$15.96

CPI-W

Nov. 21 v. Nov. 20

6.40%

N/A

Milpitas, CA

$15.65

$16.40

CPI-W

Feb. 22 v. Feb 21

5.00% (Cap)

Nearest multiple of 5 cents (Down)

Pasadena, CA

$15.00

$16.11

CPI-U

Feb. 22 v. Feb. 21

7.40%

N/A

San Francisco, CA

$16.32

$16.999

CPI-W

2021 v 2020

4.10%

N/A

Santa Monica, CA

$15.00

$15.96

CPI-W

Nov. 21 v. Nov. 20

6.40%

N/A

Santa Monica, CA (Hotels)10

$17.64

$18.17

CPI-U

2021 v. 2020

3.00% (Cap)

Nearest 1/10 of 1%

West Hollywood, CA (Hotels & Related Entities)

$17.64

$18.35

CPI-W

Jan. 22 v. Jan. 21

4.00% (Cap)

N/A

District of Columbia

$15.20

$16.10

CPI-U

Jan. 22 v. Jan. 2111

6.00%

Nearest multiple of 5 cents

Chicago, IL (≥21 EE)

$15.00

$15.40

Unspecified

Unspecified

2.50% (Cap)

Nearest multiple of 5 cents

Cook County, IL

$13.00

$13.35

CPI-U

Apr. 22 v. Apr. 21

2.50% (Cap)

Nearest multiple of 5 cents

Montgomery County, MD (≥51 EE)

$15.00

$15.65

CPI-W

2021 v 2020

4.46%

Nearest multiple of 5 cents (Down)

Minimum Cash Wage & Maximum Tip Credit

Jurisdiction

Minimum Cash Wage

Maximum Tip Credit

District of Columbia

$5.35 (30₵)

$10.75 (60₵)

Chicago, IL (≥21 EE)

$9.24 (24₵)

$6.16 (16₵)

Cook County, IL

$7.40 (20₵)

$5.95 (15₵)

Montgomery County, MD

$4.00 (No Change)

$11.65 (65₵)

Post-July 1, 2022 Changes (Preset)

On September 30, 2022, in Florida the minimum wage and minimum cash wage for tipped employees will increase $1.00 per hour to $11.00 and $7.98 per hour, respectively, with the maximum tip credit remaining at $3.02 per hour.

Employers in Hawaii are waiting to see whether the governor will sign HB 2510, which proposes multiple minimum wage increases, the first of which would occur on October 1, 2022, when the minimum wage would increase by $1.90 per hour to $12.00, and the maximum tip credit would increase 25 cents to $1.00 per hour if the employee’s direct wage plus tips is at least $7 more than the minimum wage, i.e., $19.00 per hour.

Exempt Employees & Minimum Wage

White Collar Employees Covered by Minimum Wage

In various states, employees covered by the executive, administrative, professional, or outside sales exemptions are exempt from state overtime requirements, but not exempt from state minimum wage requirements. In these jurisdictions, such employees must earn at least the applicable minimum wage for each hour worked in a workweek. In one such state, Nevada, on July 1 the minimum wage will increase to $10.50 or $9.50 per hour, depending on whether an employer offers health benefits. Note that, in Arizona and Illinois, local minimum wage rates may apply (see above), which could affect executive, administrative, or professional employees (and outside sales employees in Arizona).

Commissioned Employee Overtime Exemption

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 upcoming mid-year 2022 rate changes, the 7(i)-type exemption requires – in part – an employee’s pay to either equal or exceed one-and-a-half times the state minimum wage: District of Columbia; Nevada; Oregon. Additionally, in Connecticut, pay must exceeds two times the state minimum wage.


See Footnotes

1 April 1, 2022 was the first time a local minimum wage rate existed in Tucson; previously, only state law applied.

2 April 1, 2022 was the first time a local minimum wage rate existed in Howard County; previously, only state law applied. Howard County’s “small employer” rate applies to businesses that are considered a “small” employer under Maryland law (14 or fewer employees), but also to certain businesses that are tax-exempt, providing home health or community-based services, and/or food service facilities. Because the rate beforehand would be set by state law, and the local law uses standards different than state law, we cannot list with 100% accuracy what the amount of an increase, if any, might occur.

3 July 1, 2022 will be the first time a local minimum wage rate exists in Foster City; previously, only state law applied.

4 Since January 1, 2022, the state minimum wage has been $10.33 per hour for employers whose annual gross volume of sales made or business done is not less than $500,000, which exceeds the $10.00 per hour local minimum wage applicable to these employers. Whether the state or local rate applies will depend on the employer’s annual gross revenue.

5 The “Urban” rate applies to employers located within the urban growth boundary of a metropolitan service district organized under state law (i.e., Portland area). The “Nonurban” rate applies to employers located within a nonurban county. Nonurban counties include: Baker; Coos; Crook; Curry; Douglas; Gilliam; Grant; Harney; Jefferson; Klamath; Lake; Malheur; Morrow; Sherman; Umatilla; Union; Wallowa; and Wheeler. The "General" rate applies in areas not covered by the "Urban" or "Nonurban" rates. Or. Rev. Stat. § 653.025.

6 Although Emeryville’s rules suggest the city uses a March-March calculation, in conversations with the agency it turns out a year-year calculation has been what the city has used in prior years and does use for the July 1, 2022 rate adjustment.

7 On July 1, 2022, one minimum wage rate applies to all employers.

8 Although, as the Citywide Hotel Worker Minimum Wage Ordinance (CHWMWO) reads currently, the rate calculation appears to (eventually) incorporate by reference the rate calculation under the Minimum Wage Ordinance (MWO), the rate calculation the city actually uses is based on standards that existed when the CHWMWO was first enacted, which predates the MWO.

9 A separate, lower rate applies to government-supported employees, and on July 1, 2022, it will increase from $14.44 to $15.03.

10 Santa Monica uses the rate under the Los Angeles Citywide Hotel Worker Minimum Wage Ordinance.

11 D.C. Code § 32-1003 references “the annual average increase, if any, in the Consumer Price Index for All Urban Consumers in the Washington Metropolitan Statistical Area published by the Bureau of Labor Statistics of the United States Department of Labor for the previous calendar year,” but does not provide specific dates for the “annual” period. The increase amount, however, appears to be the result of comparing the CPI data point for January 2022 (286.678) against that for January 2021 (270.535) – around 6% (5.97%), the amount of the increase – rather than, say, comparing the annual figure for 2021 (277.728) against that for 2020 (267.157) – around 4% (3.96%).

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.