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.
2019 marks the start of Wage Watch’s third year of publication, which we will celebrate the only way we (sadly) know how: by recapping federal, state, and local developments concerning the minimum wage, tips, and overtime.
Revised White Collar Pay Standards: Employers may not have to wait too much longer to see how much the U.S. Department of Labor will increase the minimum salary or fee amount executive, administrative, or professional employees must receive to be considered exempt from the Fair Labor Standards Act’s minimum wage and overtime requirements. However, they will need to wait because the proposal must be reviewed by the White House Office of Management and Budget (OMB) before it is published in the Federal Register.1 The anticipation might also be killing employers in Washington State and Pennsylvania that are waiting for those states’ labor departments to present, and progress, their pay change proposals.
Regular Rate Rule Revisions: Reports have also circulated that the DOL has sent to the OMB a proposal to revise rules concerning how to calculate the regular rate for FLSA overtime purposes. The revisions are expected to clarify the types of compensation that must be included in an employee’s regular rate.
Congress in Action v. Congressional Inaction: Having regained control the House of Representatives, Democrats will push various proposals to increase the federal minimum wage. For example, the Raise the Wage Act (H.R. 582), introduced by Representative Bobby Scott (D-VA), which would raise the federal minimum wage to $15.00 per hour over a five-year period, thus far has 193 co-sponsors. Regardless of how many, or successful, House bills there are, their reception may be less than favorable in the Senate, as might similar bills originating in that chamber. For example, either the “Bern” or “burn” will be felt by the Senate companion bill (S. 150) to H.R. 582, introduced by Senator Bernie Sanders (I-VT). Republicans might offer their own proposals. For example, H.R. 488, the Employee Bonus Protection Act, introduced by Representative Calvert Ken (R-CA), proposes to exclude from FLSA regular rate calculations payments “made to reward an employee or group of employees for meeting or exceeding the productivity, quality, efficiency, or sales goals as specified in a gainsharing plan, incentive bonus plan, commission plan, or performance contingent bonus plan.”
Supremes to Drill-Down on Which Minimum Law Applies to Offshore Operations: The U.S. Supreme Court agreed to hear a case to determine whether federal or state wage law applies to offshore drilling rigs.
The State(s) of Affairs: Thus far, in 2019 more than 100 bills connected to the minimum wage, tips, and/or overtime have been introduced in more than half of the states. A summary of each bill will not be provided (in part because the vast majority will not be enacted), but we will highlight common themes – other than generally increasing the rate – and provide examples, so employers understand the type of changes that could occur.
- Fight for $15: For years, the issue has been hotly debated and in 2019 this will continue. Maryland HB 166 and SB 280 would establish $15.00 per hour minimum wage rates by mid-2024. Our New Jersey colleagues tell us it is a matter of when, not if, a bill eventually setting a $15.00 minimum wage in the Garden State will be signed.2 However, the target number was established years ago and some may argue it no longer suffices. Minnesota SB 622 and 626 would establish, in late 2023, a $16.00 per hour rate applicable to businesses with annual gross sales of at least $500,000, and Hawaii HB 1191 proposes a $17.00 per hour minimum wage in 2025.
- Annual Adjustments v. One-Time Changes: More than one-third of the states currently or in the future will annually adjust their minimum wage rate based on consumer price index changes. Lawmakers may find this approach more appealing than establishing pre-set rates and periodically revisiting the issue. Nebraska LB 383 proposes annual adjustments beginning in early 2020, while Texas HB 820 proposes a one-time increase from $7.25 to $10.10 per hour.
- Tiered Minimum Wage: Variations on the tiered minimum wage exist, e.g., laws may establish different pay rates based on location (Oregon), annual gross sales (Minnesota), whether employees are offered benefits (Nevada), industry (New York), etc. New Hampshire SB 10 proposes, beginning in 2022, a two-tier system based on whether an employee is provided at least 10 paid sick days; an employer could pay such employees $1.00 less per hour than the proposed $12.00 per hour wage rate.
- Establish a Minimum Wage: Few states are without a minimum wage law. Efforts to make that number zero will continue. Numerous Mississippi bills creating a statutory scheme have been filed.
- Eliminating or Reducing the Tip Credit: The tug-of-war will continue over whether tipped employees should be paid less than the minimum wage if their direct wage plus tips equals at least minimum the minimum wage. New Mexico HB 46 would eliminate the tip credit, whereas New York SB 1760 would gradually reduce, then eliminate, the tip credit.
- Credit Card Tip Fees: More jurisdictions could expressly regulate how to handle tips provided via credit card. Pennsylvania SB 79 would require employers to provide tipped employees the full amount of credit card tip and prohibit them from trying to recoup credit card processing fees or costs.
- Tip Pooling or Sharing: Which employees are included and excluded in tip pooling or tip sharing arrangements will be addressed. Maine LD 81 attempts to further clarify tip pooling standards by saying the practice is permitted if only service employees are included and the arrangement does not violate federal standards.
- Daily & Weekly Overtime: Few states have a daily overtime law. Indiana HB 1608 proposes to, beginning in 2020, require employers to pay employees a premium rate of one-and-a-half times their regular rate if they work longer than their scheduled shift. It would also require “double time” if employees work more than 52 hours in a week.
- Eliminating Subminimum Wage Based on Age or Disability: Lawmakers may attempt to repeal laws that permit employers to pay a rate that is less than the minimum wage to employees whose earning capacity is impaired by age or disability, e.g., Hawaii HB 1341.
- Eliminating Training or Learner Wage Rate: Various state legislatures will consider curtailing an employer’s ability to pay younger employees less than the minimum wage, generally or for a defined period of initial employment, e.g., Idaho HB 54.
Preemption & Pocketbooks
- Preemption v. Anti-Preemption: Throughout 2019, whether the minimum wage is a matter of statewide concern is a question that will be asked. Some legislators may attempt to lift bans on local minimum wage ordinances, e.g., Idaho HB 50 and Iowa SB 95; others will look to assert the state’s dominance, e.g., West Virginia SB 376.
- Tax Credits: Businesses will look to see whether lawmakers will help them offset increased wage costs. Hawaii SB 1248 proposes tax relief to small businesses that pay employees at least $10.10 per hour.
Local Motion: If inaction or limited action on the minimum wage, tips, or overtime continues at the federal and state levels, employers should still expect that local efforts to establish standards may not be derailed in 2019.
In mid-January, Daly City, California became the 20th municipality in the San Francisco Bay Area to enact a local minimum wage ordinance, effective February 13, 2019. The new rate, applicable to all employers, will be $12.00 per hour, which is the current state minimum wage rate for businesses with 26 or more employees (an $11.00 per hour state rate applies to businesses with 25 or fewer employees). On January 1, 2020, the Daly City minimum wage will exceed both state minimum wage rates when it increases to $13.75 per hour (compared to state rates of either $13.00 or $12.00 per hour); the gap between local and state rates will widen further on January 1, 2021, when the Daly City rate increases to $15.00 per hour and the state rates increase to $14.00 and $13.00 per hour. Beginning January 1, 2022, the Daly City rate will be annually adjusted based on consumer price index (CPI) changes; even if the CPI decreases, the city minimum wage will not. Bay Area businesses may feel “20 is plenty,” but wage increase proponents are asking lawmakers to “get on the bus to 20-plus.” For example, a citywide minimum wage ordinance proposal was well-received in January by the Fremont City Council. Additionally, efforts are underway to bring local minimum wage ordinances to North Bay cities like Novato, Petaluma, Santa Rosa, Sebastopol, and Sonoma.
The Glenview, Illinois Board of Trustees voted in favor of reconsidering its prior decision to opt out of Cook County’s minimum wage law (and paid sick leave law). Because a significant number of Cook County voters answered “yes” to a November 2018 advisory question concerning whether their municipality should follow the county law, in 2019 more local legislators are expected to similarly revisit the opt-in or opt-out issue.
We will continue to monitor and report on minimum wage and overtime developments as they occur.
1 Tammy McCutchen, DOL Sends Proposed Overtime Rule to the White House, Littler ASAP (Jan. 10, 2019)
2 Russell McEwan and Emily David, New Jersey Employers Should Expect Minimum Wage Hike to $15 Per Hour, Littler ASAP (Jan. 28, 2019).