States are Acting on Minimum Wage

On November 7, voters in six states will decide whether to raise their minimum wage.  Already this year ten state legislatures have voted to raise the minimum wage above the federal level of $5.15 per hour, continuing an unprecedented two-year trend of state action on an issue that remains deadlocked in Congress.

If half of the six states (Arizona, Colorado, Missouri, Montana, Nevada, and Ohio) where the minimum wage hike is on the ballot approve an increase, for the first time a majority of the states will require higher pay than the federal rate.

Currently 23 states and the District of Columbia have in effect, or have approved for future effect, minimum wage rates above $5.15.  These rates range up to the $8 per hour rate that will go into effect in California and Massachusetts in 2008.  In addition, numerous local jurisdictions have passed so-called living wage ordinances which set a higher minimum wage within a city, although some employers are exempt from these requirements.

Advocates for raising the minimum wage say that inflation since 1997 has eroded the last increase.  Opponents of an increase say it hurts small businesses, the hospitality industry, and entry-level employees, including teenagers.

What does this trend of states pre-empting the minimum wage issue mean for employers, especially those with operations in more than one state?  The Fair Labor Standards Act (FLSA) sets the federal minimum wage.  It was originally set at $.25 an hour and was last amended in 1997 when the rate was increased to $5.15.  Employers in a state are generally required to pay the higher rate established by the state, with certain industries or small employers sometimes exempted.

Having varying minimum wages in different states requires multi-state employers to stay on top of changes in the states in which they employ workers.  It also may make it difficult to have uniform salary rates from state to state as a higher minimum wage in one state may cause the entire wage scale in that locale to shift upward.

For those employers who pay well above the minimum wage, the ripple effect of a rise in the minimum wage may affect their pay rates.  In addition, in some states the required salary for certain employees to be considered exempt from overtime pay is tied to the minimum wage.  For instance, in California for the executive, administrative or professional exemption to apply, the employee must be paid at least twice the state’s minimum wage, among other qualifications.  For outside salesperson to be exempt, they must be paid at least one and a half times the state minimum wage in California.  Also, some collective bargaining agreements have wage rates tied to the minimum wage.

Although most people on election night will be watching the results of Congressional and gubernatorial races across the country, in the states in which the minimum wage issue is on the ballot, employers there will anxiously await the outcome of those votes.

Any questions regarding Minimum Wage or any other human resources topic, you can contact David L. Hansen, SPHR, CCP at (515) 221-1718 or hansend@hr-onesource.com.