WPI Wage Watch: Minimum Wage, Tip, and Overtime Developments (February Edition)

Hey, do you want to read an article not about COVID-19? Well, you are in luck, because in this virus-free issue of Wage Watch, we discuss only developments concerning the minimum wage, tips, and overtime that occurred in the last few weeks, while you may have been distracted.

U.S. Department of Labor Developments: Attorneys general from numerous states filed a lawsuit to block the recently finalized U.S. Department of Labor rule concerning joint employer status.

State Legislative and Regulatory Updates: In Colorado, the state department of labor released three interpretive notices and formal opinions. The first item broadly covers Colorado Overtime and Minimum Pay Standards (“COMPS”) Order #36, which will take effect on March 16, 2020, and the second item concerns administrative enforcement. For hospitality industry employers, the third item, concerning tips and tipped employees, will generate particular interest. The guidance discusses a "20% Rule" concerning non-tipped duties performed by tipped employees, notice employers must provide to employees if they use tip pooling, and how employers must calculate overtime for tip credit employees.

By overriding the governor's veto, Vermont legislators increased the state minimum wage from $10.96 per hour to, on January 1, $11.75 (2021) and $12.55 (2022), with annual adjustments based on consumer price index changes resuming in 2023. For tipped employees, employers must pay a cash wage that is no less than 50% of the applicable minimum wage. Because the minimum wage will be an odd number in 2021 and 2022, and based on similar occurrences in previous years, we expect the state labor department to say the lowest possible minimum cash wage to be one cent per hour greater than the maximum tip credit, i.e., $5.88 and $5.87 per hour, and $6.28 and $6.27 per hour, respectively. The bill also requires a report to be provided to state legislators on or before January 15, 2021 concerning reducing or eliminating the tip credit.

The Washington State Department of Labor and Industries proposed corrections to recently finalized rules concerning exempt outside sales employees that will take effect on July 1, 2020. Per the department, it intended the duties test to "substantially align" with the federal Fair Labor Standards Act duties test, but, due to an inadvertent error, the final rule contained language it intended to remove. Specifically, the proposal seeks to require an employee's primary duty to be: 1) making sales, including any sale, exchange, contract to sell, consignment for sale, shipment for sale or other disposition; or 2) obtaining orders or contracts for services or for the use of facilities for which the client or customer will pay consideration.

Other State Legislative Updates: In February, there was movement on a ridiculous number of minimum wage, tip, and overtime bills. Accordingly, below we briefly discuss bills that are further along in the legislative process and highlight some notable new bills.

Hawaii HB 2541, which passed out of the state house (at the beginning of March) proposes to increase the state minimum wage from $10.10 per hour, on January 1, to $11.00 (2021), $12.00 (2022), $12.50 (2023), and $13.00 (2024).

In New Hampshire, SB 410, which passed out of the state senate, proposes to increase the state minimum wage from $7.25 to $10.00 per hour on January 1, 2021, then to $12.00 per hour on January 1, 2023. For tipped employees, the bill seeks to increase (numerically but not proportionally) the minimum cash wage from 45% of the minimum wage to $4.00 per hour for customarily tipped employees of restaurants, hotels, motels, inns, cabins, or ballrooms, and to establish a $7.25 per hour minimum cash wage for employees who are licensed secondary game operators.

In Rhode Island, both houses passed and sent to the governor SB 2147 and HB 7157, which propose to increase the state minimum wage from $10.50 to $11.50 per hour beginning October 1, 2020.

In Virginia, legislators were busy. SB 78, passed by both houses, proposes to eliminate the minimum wage and overtime exemption for a person who normally works and receives pay based on the amount of work done. Additionally, legislators will hold a conference committee to resolve their differences concerning HB 395, which proposes to increase the state minimum wage. Another minimum wage increase proposal, SB 7, passed the state senate and then was amended and approved by the house; it will return to the senate to see whether they will agree to raising the minimum wage from $7.25 to $15.00 per hour by July 2025.

Additionally, newer bills of note include the following:

  • Anti-Preemption: Kansas HB 2584 and Wisconsin AB 961 propose to repeal state laws that prohibit local minimum wage ordinances.
  • Minimum Wage
    • New: Various bills in Louisiana, Mississippi, and Tennessee would create a state minimum wage where none currently exists.
    • Regional: Illinois HB 4972 proposes establishing three regional minimum wage rates throughout the state, whereas Pennsylvania SB 862 proposes to establish one state minimum wage rate in Alleghany County and Garrett County, and a different rate in all other counties.
    • Fight for $15: Arizona SB 1516 proposes to increase, immediately upon enactment, the minimum wage from $12.00 to $15.00 per hour.
    • Exceptions: Currently, the Missouri minimum wage does not apply to employees of retail or service businesses with annual gross sales of less than $500,000, but SB 1043 would increase the threshold to less than $1 million.
    • Ballot Measure: Oklahoma HB 2986 proposes to submit to voters a ballot measure to increase the minimum wage from $7.25 to, on January 1, $9.25 per hour (2021), $10.00 (2022), and $11.00 (2023).
  • Tip Credits: New Jersey SB 1572 would eliminate tip credits, whereas Minnesota SB 3374 would eliminate the ban on tip credits.

Local Matters: Per usual, northern California's San Francisco Bay Area makes our update. The Half Moon Bay City Council enacted a minimum wage ordinance that will require a $15.00 per hour minimum wage for all covered employees beginning January 1, 2021, with annual adjustments based on consumer price index changes in future years. The Hayward City Council enacted a minimum wage ordinance. Beginning July 1, 2020, employers with 26 or more employees must pay covered employees $15.00 per hour, and those with 25 or fewer employees must pay $14.00 per hour. In future years, the city will adjust both rates based on consumer price index changes; however, the "small" employer rate will generally track the state $15.00 per hour rate beginning January 1, 2023, and the law expressly says the annual increases occurring on July 1, 2021 and 2022 cannot cause that rate to exceed $15.00 per hour. As enacted, beginning on January 1, 2023, the dates upon which the "large" and "small" employer rates will increase will not align, which is something city councilmembers said they would address in the future. Meanwhile, the San Carlos City council held its first hearing concerning a proposed minimum wage ordinance. At the beginning of February, the Burlingame City Council held a study session concerning a potential minimum wage ordinance.

The Summit County, Colorado Board of Commissioners voted to continue its initial hearing concerning a proposed minimum wage ordinance to its March 10, 2020 meeting. News outlets report that members of the Boulder City Council and Boulder County Commissioners met to discuss a regional minimum wage ordinance.

In New Mexico, Santa Fe County announced that its minimum wage would increase from $11.80 to $12.10 per hour as of March 1, 2020, and the minimum cash wage for tipped employees increased from $3.53 to $3.62 per hour.

The Philadelphia, Pennsylvania City Council approved a measure that will ask voters at the April 28, 2020 election to approve creating a local labor department to enforce its minimum wage ordinance, along with other local employment laws like the paid sick leave and fair workweek ordinances. The proposal would also create a board to review and adjudicate the department's work.

We will continue to monitor and report on minimum wage and overtime developments as they occur.

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.