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.
This October there are no tricks, but there are plenty of treats (assuming you have a sweet tooth for minimum wage, overtime, and tip developments at all levels of government).
Hot Tip (Regulation): The U.S. Department of Labor (DOL) proposed changes to federal Fair Labor Standards Act (FLSA) tip regulations to clarify who can and cannot receive tips of a tipped worker for whom an employer does not claim a tip credit. The proposed changes also outline the proper scope of the DOL’s dual jobs regulation and the "20% Rule" involving work done by tip credit employees.1 Later in the month, Democratic members of the House Education and Labor Committee sent a letter to new DOL Secretary Eugene Scalia requesting "quantitative estimates of the costs to workers" for the agency's proposal concerning the "20% rule."
U.S. Department of Labor Enforcement Update: The DOL announced that it collected $322 million in back wages for workers in fiscal year (FY) 2019. For comparison, in FY 2018 the agency collected nearly $305 million and in FY 2017 it collected over $270 million. Interestingly, in FY 2019 the Department expended fewer hours on enforcement, registered fewer complaints, and/or concluded fewer cases than in the previous two fiscal years. However, the number of employees receiving back wages increased. Of back wages recovered under the FLSA in FY 2019, overtime damages represented 83%, far surpassing minimum wage relief.
White (Hot) Salary Pay Requirements: On January 1, 2020, the minimum salary or fee employers must pay exempt executive, administrative, and/or professional employees under the FLSA will increase from $455 to $684 per week ($35,568 annualized), excluding board, lodging, or other facilities. Notwithstanding the federal rate increase, various states have salary requirements that exceed the revised federal standard: Alaska, California, Colorado,2 Maine, and New York State. Additionally, more states may join this list.
In October, there were two notable developments. Pennsylvania's Department of Labor and Industry submitted its final regulation for review.3 If approved, the state EAP salary threshold will increase, on January 1, to $684 per week / $35,568 annually (2020), $780 per week / $40,560 annually (2021), and $875 per week / $45,500 annually (2022). In 2023 and each third year thereafter it will be an amount equal to the 10th percentile of all Pennsylvania workers who work in salaried exempt EAP jobs. Additionally, changes to required duties have been proposed. Michigan Governor Gretchen Whitmer (D) directed the state labor department to submit a rulemaking to increase the minimum amount employers must pay EAP employees. We do not know what number(s) the department will propose, but employers should expect a rate that exceeds the FLSA amount, which the governor contended benefits less than one in six Michiganders. Separately, a Michigan legislator introduced HB 5036, which proposes to increase the weekly minimum amounts as follows: $673 (2019); $769 (2020); $865 (2021); $961 (2022); and $1,057 (2023-24). Additionally, the bill proposes, beginning in 2024, annual adjustments to take effect on April 1 (no joke).
A think tank is calling on New Jersey Governor Phil Murphy (D) to consider having the state labor department revise applicable regulations to increase the minimum pay requirement for exempt employees from the FLSA rate (which New Jersey rules incorporate) to two-and-a-half times the state minimum wage. Were the state to adopt such a proposal, when the applicable state minimum wage reaches $15.00 per hour (timing varies by applicable rate), to qualify for exemption an employee would need to earn more than $70,000. While the "2.5" rate proposal may surprise some employers, Washington State has already proposed a rate increase that would eventually lead to such a rate in 2025 or 2026, depending on an employer's size.4
California Overtime Exemption Update: California law provides that certain computer software employees, as well as licensed physicians and surgeons, are exempt from state overtime requirements if they receive a minimum hourly, monthly, or yearly rate, which is determined annually based on cost-of-living changes. Effective January 1, 2020, the computer software employee minimum hourly rate will increase from $45.41 to $46.55 per hour, the minimum monthly salary amount will increase from $7,883.62 to $8,080.71, and the minimum annual salary amount will increase from $94,603.25 to $96,968.33. For licensed physicians and surgeons, the minimum hourly rate of pay will increase from $82.72 to $84.79.
Reminder About Minimum Wage Changes that Occurred on October 1: In Connecticut, the minimum wage increased from $10.10 to $11.00 per hour. For tipped employees, the minimum cash wage remains $6.38 per hour for hotel or restaurant industry employees, and $8.23 per hour for bartenders, but the maximum tip credit increased from $3.72 to 4.62 per hour, and from $1.87 to $2.77 per hour, respectively. Connecticut's October 1, 2019 rate will only last 11 months, with the next increase occurring on September 1, 2020. In Delaware, the minimum wage increased from $8.75 to $9.25 per hour. For tipped employees, the minimum cash wage remains $2.23 per hour, but the maximum tip credit increased from $6.52 to $7.02 per hour.
2020 Adjusted Minimum Wage Announcements: States and localities continued to announce what their consumer-price-index-adjusted minimum wage rates will be, effective January 1, 2020.
- Cupertino: The minimum wage will increase from $15.00 to $15.35 per hour.
- El Cerrito: The minimum wage will increase from $15.00 to $15.37 per hour.
- Los Altos: The minimum wage will increase from $15.00 to $15.40 per hour.
- Mountain View: The minimum wage will increase from $15.65 to $16.05 per hour.
- Palo Alto: The minimum wage will increase from $15.00 to $15.40 per hour.
- Santa Clara: The minimum wage will increase from $15.00 to $15.40 per hour.
- Sunnyvale: The minimum wage will increase from $15.65 to $16.05 per hour.
- Florida: The minimum wage will increase from $8.46 to $8.56 per hour. For tipped employees, the maximum tip credit remains $3.02 per hour, but the minimum cash wage will increase from $5.44 to $5.54 per hour.
- Montana: The minimum wage will increase from $8.50 to $8.65 per hour. Montana prohibits tip credits.
- New Mexico
- Albuquerque: The minimum wage will increase from $9.20 to $9.35 per hour, or $8.20 to $8.35 per hour if an employer provides healthcare and/or childcare benefits and these benefits equal or exceed $2,500 annually. For tipped employees, the minimum cash wage will increase from $5.50 to $5.60 per hour, and the maximum tip credit will increase from either $3.70 to $3.75 per hour or $2.70 to $2.75 per hour.
- Bernalillo County (Unincorporated): The minimum wage will increase from $9.05 to $9.20 per hour, or from $8.05 to $8.20 per hour if an employer provides healthcare and/or childcare benefits and these benefits equal or exceed $2,500 annually. For tipped employees, because of upcoming changes to the state minimum wage, the local minimum cash wage will increase from $2.13 to $2.35 per hour, making the maximum tip credit $6.85 or $5.85.
- Las Cruces: The minimum wage will increase from $10.10 to $10.25 per hour. For tipped employees, the minimum cash wage will increase from $4.04 to $4.10 per hour, and the maximum tip credit will increase from $6.06 to $6.15 per hour.
- South Dakota: The minimum wage will increase from $9.10 to $9.30 per hour. For tipped employees, both the minimum cash wage and maximum tip credit will increase from $4.55 to $4.65 per hour.
- Vermont: The minimum wage will increase from $10.78 to $10.96 per hour. For tipped employees, both the minimum cash wage and maximum tip credit will increase from $5.39 to $5.48 per hour.
- Washington State
- Seattle: For employers with 501 or more employees, the minimum wage increases from $16.00 to $16.39 per hour. For employers with 500 or fewer employees, the 2020 rates were already set by the ordinance: $15.75 per hour for employers that do not pay at least $2.25 per hour toward medical benefits and/or where the employee does not earn at least $2.25 per hour in tips; $13.50 per hour for employers that pay at least $2.25 per hour toward health benefits and/or where the employee earns at least $2.25 per hour in tips.
- SeaTac: The minimum wage will increase from $16.00 to $16.34 for covered hospitality and transportation workers.
Additionally, New Jersey's labor department announced that the 2020 rate established in AB 15 (2019) will apply instead of an annually adjusted rate. Under AB 15, on January 1, 2020 and on each subsequent January 1, the minimum wage must increase based on changes to the consumer price index, unless the rate identified in AB 15 exceeds that adjusted rate, which is the case for 2020. Accordingly, the general minimum wage will increase from $10.00 to $11.00 per hour; for tipped employees, the minimum cash wage will increase from $2.63 to $3.13 per hour, and the maximum tip credit will increase from $7.37 to $7.87 per hour. The minimum wage rate applicable to employees or small or seasonal employers, and piece rate or hourly employees on a farm, will increase from $8.85 to $10.30 per hour.
Littler’s upcoming "rates-only" article for 2020 will include a discussion of known minimum wage, minimum cash wage, and maximum tip credit changes.
State Legislative Developments: In Florida, SB 456 proposes to change how the state minimum wage is annually adjusted based on consumer price index (CPI) changes. Under the bill, for the years 2021–2028, the CPI adjustment would continue, but the adjusted amount would increase by an additional $.80 each year, and would return to a straightforward CPI adjustment for 2029 and future years.
In Wisconsin, SB 426 seeks to incentivize employers not to apply a tip credit toward tipped employee wages. It would allow employers to keep state sales taxes they collect during any sales tax reporting period if at least 5% of wages paid to tipped employees are derived from tips and the employer pays tipped employees the full minimum wage without claiming a tip credit.
Ballot Boxing: Proponents of a proposed ballot measure to increase Florida's minimum wage say they have secured the requisite number of signatures to put the question to Sunshine State voters in November 2020, though the petition must still undergo state supreme court review. The measure seeks to amend the state constitution and set a $10.00 per hour minimum wage on September 30, 2021, which will annually increase by $1.00 per hour per year until September 30, 2026, when it will reach $15.00. Also, a reminder that at the November 5, 2019 election, residents of Rancho Palos Verdes in Southern California will vote on Measure B. If approved, Measure B would require large hospitality employers—hotel, golf course, or amusement park employers with 50 or more employees—to pay covered employees a $15.00 per hour minimum wage that will be adjusted annually.
Local Matters: Three more cities in Northern California's San Francisco Bay Area enacted a minimum wage ordinance. South San Francisco adopted a $15.00 per hour minimum wage for all employers, effective January 1, 2020, which will annually increase each January 1 based on changes to the consumer price index. Novato adopted a three-tier minimum wage, with varying rates based on whether an employer has 100 or more (large), 26-99 (medium), or 25 or fewer (small) employees. Beginning January 1, 2020, a $13.00 per hour rate will apply to all employers except small employers, which will be subject to a $12.00 per hour minimum wage. Shortly thereafter, on July 1, 2020, the minimum wage will increase to $15.00 (large), $14.00 (medium), or $13.00 (small) per hour. For medium employers, another $1.00 per hour increase will occur on January 1, 2021, and for small employers $1.00 per hour increases will occur on January 1, 2021 and 2022. The year after an applicable rate hits $15.00, it will be annually adjusted (2021 for large, 2022 for medium, and 2023 for small). Beginning on July 1, 2020, Santa Rosa's ordinance requires covered employees to receive a $15.00 per hour minimum wage from employers with 26 or more employees, and a $14.00 per hour minimum wage from employers with 25 or fewer employees. However, in 2021, one rate will apply to all employers, which will be the $15.00 per hour rate adjusted based on changes to the consumer price index. Additionally, the Hayward City Council received a staff report about creating a local minimum wage ordinance.
In Fort Collins, Colorado, the city's Economic Health and Redevelopment Director submitted a memo to the city council concerning a plan to analyze the possibility of a minimum wage ordinance.
The sponsor of legislation to increase the local minimum wage in Chicago, Illinois reportedly believes the city council will vote on the bill in November.
A Saint Paul, Minnesota Department of Human Rights and Equal Economic Opportunity press release invited individuals to submit public comments on proposed minimum wage rules and business resources by November 22, 2019. The city's minimum wage ordinance will take effect on January 1, 2020.
There were also industry-specific minimum wage-related developments: The Los Angeles, California City Council will study the feasibility of establishing a $30.00 per hour pay requirement for rideshare drivers. In Oakland, California, the Division of Contracts & Compliance released proposed rules implementing Measure Z, the voter-approved Oakland Hotel Workers Protection and Employment Standards Law. November 30, 2019 is the deadline for interested parties to submit comments. Among numerous Measure Z requirements is for covered employees to receive a minimum wage, which currently is $15.00 per hour with health benefits or $20.00 per hour without health benefits; both rates exceed Oakland's generally applicable minimum wage of $13.80 per hour.
Finally, though not technically a minimum wage, overtime, or tip development, Minneapolis, Minnesota's Department of Civil Rights is seeking public comment on its proposed wage theft rules and FAQ; the comment deadline is December 31, 2019. Additionally, three Minneapolis City Council members have requested feedback about extending protections in the city's Wage Theft Protection Ordinance to freelance workers.
We will continue to monitor and report on minimum wage and overtime developments as they occur.
1 For more information about the proposed rule, see David B. Jordan and Dan Boatright, DOL Issues Proposed Regulations on Handling Tips and the “80/20 Rule”, Littler ASAP (Oct. 8, 2019).
2 Depending on how many hours the employee works.
3 For more information about the proposed final rule, see Robert W. Pritchard and Joshua C. Vaughn, Pennsylvania Moves One Step Closer to Substantially Increasing White Collar Exemption Salary Threshold, Littler ASAP (Oct. 17, 2019).
4 Littler will soon publish its annual "rates-only" article for 2020, in which we'll discuss known exempt employee pay increases, identify states where white collar employees are not exempt from minimum wage requirements, and highlight how minimum wage increases will impact 7(i)-type commissioned employees.