On July 24, 2009, the federal minimum wage increased by 70 cents from $6.55 per hour to $7.25 per hour. This increase was the third and final increase in the federal minimum wage as set forth by the Fair Minimum Wage Act of 2007.
Employers in Minnesota and throughout the U.S. must take this opportunity to update their labor law posters, both state and federal. They are legally required to display the most recent labor law posters, and in a spot easily accessible to all employees.
The Fair Labor Standards Act of 1938 (FLSA) is the law which governs the federal minimum wage. FLSA applies to all businesses that earn $500,000 or more per years. Companies who conduct business out of state are also covered by FLSA.
FLSA law applies to individuals engaged in interstate commerce, too, even if the business does not. For example a receptionist who answers out-of-state calls or mails packages outside of the state, qualifies under FLSA and would be paid the federal minimum.
Being that the Minnesota minimum wage bill on the table in the Senate, which includes a inflation increase and does not mirror the federal minimum wage bill in increases, is different than what the governor supports, it will be interesting to see how this plays out. My sources on the subject at the moment have not told me where the House stands on this issue, but they could be the key.
If the House sides with the governor on what should appear in the Minnesota minimum wage bill, then you could expect that the Senate will have to compromise with the House in order to get any sort of minimum wage increase in the state. It would much like the situation in the state of Indiana that we have seen go down in the last couple of months, where leaders in the House wanted an all out minimum wage increase, whereas leaders in the Senate wanted to match the minimum wage increase with what goes on in the federal minimum wage bill debates.
The Senate eventually won out, claiming that just to get a minimum wage bill passed was the compromise, and the House eventually relented and agreed and took the compromise. The governor in the situation in Indiana, would have supported the further minimum wage increase from I could gather, but the leaders in the Senate seemed to have the trump card (whatever it was).
The situation in Minnesota’s minimum wage debates are a little different, with the Senate being the legislative body looking for a big change in the minimum wage, and the governor sided on the more conservative side of the debate, with conservative meaning that he doesn’t want to move forward until the federal minimum wage debates get solved. It will depend on where the House leadership falls in the debate. Stay tuned!
As I was explaining the other day, the state of Minnesota is considering a new minimum wage, at least the Senate did. It passed on a preliminary vote 40 to 23 in that body of the state legislature, but that doesn’t mean Minnesota will have a new minimum wage sometime soon. The official vote in the Senate still needs to happen, and then the House in Minnesota will need to vote on it as well.
Then there is the issue of the state governor, Gov. Tim Pawlenty, a Republican. Gov. Pawlenty has come out and said that, on the record, he would support a new Minnesota minimum wage increase, but not just any minimum wage increase. According to the governor, the one he would support would be one that matches the proposed federal minimum wage increases being considered in the House and the Senate on the federal level in Washington DC.
That would mean, as we all remember, and ultimate minimum wage increase to $7.25 per hour, and one that would increase to that level over the course of three changes in the next two years or so. The governor has also said that, as with the proposed federal minimum wage, a Minnesota minimum wage law change that he would support would not include annual changes to adjust for inflation, which is a facet of the Minnesota minimum wage law now in the Senate.
Another facet of a Minnesota minimum wage that the governor said he would support would be a special minimum wage for trainees, which generally means a lower minimum wage for minors in the first couple months on the job. As for other special minimum wages, Pawlenty has said that he supports a tip credit, meaning that tipped employees could get paid less per hour than the usual minimum wage because of the tips that they earn from their customers.
The state Senate in St. Paul, the capital of Minnesota, has passed a new bill to raise the state minimum wage this past Wednesday. The reason behind the bill, say its Democratic supporters in the state, is that Minnesota had been falling behind other states in terms of the rate of its minimum wage—as many as 25 other states.
According to the new bill out of the Minnesota Senate, the Minnesota minimum wage for large employers in the state would go up from $6.15 per hour—its current level—to $7.75 per hour. The Minnesota minimum wage for smaller employers would go from its current rate of $5.25 per hour to $6.75 per hour. The new wage increase would start in August 2008. After that, every year, according to the new bill, the Minnesota minimum wage would go up according to the rate that inflation went up that year.
Remember, we talked before about Minnesota’s minimum wage and its two tier system of payment. (In fact, we just covered the Minnesota minimum wage of my “review” of state changes to their minimum wage, which it looks like I will now need to repeat already!). But anyway, Minnesota differentiates between smaller and larger employers in its two tier system by setting the bar at $625,000 in annual revenue. Those companies above that figure are considered large employers; those below it are considered small employers. Minnesota actually just changed its two tier minimum wage system two years ago.
Opponents of the bill say that the increased minimum wage will make it harder on Minnesota employers, and make it harder for the lowest paid workers in the state to find future jobs. Still, the opponents only mustered 23 votes in the Senate, versus the 40 votes that the supporters of the bill managed to get, thereby passing it in the Senate.
Here is another interesting fact about the Minnesota minimum wage besides the three tier system that we just talked about. The state of Minnesota’s minimum wage law contains no provisions for tip credits. We have talked about many states here at this blog—in fact, all 50 states and all of the U.S. territories—and many of them—I’d say the majority by far—have a tip credit for employers of tipped employees. Even the federal minimum wage has a tip credit for employers that are liable to follow the Fair Labor Standards Act.
Remember, the tip credit allows employers of tipped employees—usually employees who earn $20 to $30 minimum of tips per month—to pay them a lesser amount as a minimum wage, because the tips that these employees earn makes up the difference. Sometimes the tip credit is expressed as a percentage of the overall minimum wage. For instance, in Missouri, the tip credit is 50 percent of the overall minimum wage. Sometimes, the tip credit, on the other hand, is express as a static amount of money. For instance, the federal tip credit makes the federal minimum wage for tipped employees a current $2.13 per hour.
In Minnesota, however, according to the state minimum wage law as it stands now, there is no tip credit at all. That means that employers of tipped employees must pay them the full minimum wage, no matter what sort of tips these employees are pulling in from their customers. And as in most states—tip credit or not—these employers cannot withhold the employees’ tips in order to make up the difference on their end.
That being said, much of this could change if the federal minimum wage gets passed in Washington DC. By 2008, according to the federal minimum wage, most Minnesota employers liable for the FLSA would be paying the higher federal minimum wage. The Minnesota tip credit, on the other hand, would still be in force.