E-Alerts

Federal Minimum Wage Increase for the First Time in 10 Years

For the first time in ten years, President Bush has signed into law a bill that will increase the federal minimum wage – from $5.15 to $5.85 at the end of July 2007, then to $6.55 one year later, and to $7.25 in July 2009.

The federal minimum wage and overtime provisions are set forth in the Fair Labor Standards Act (FLSA) and apply to employers with an annual gross volume of sales made or business done of $500,000 or more and employees who are engaged in interstate commerce.  The FLSA also applies to federal, state, and local government agencies, hospitals, and schools.  The broad scope of the FLSA, which is liberally interpreted, subjects most public and private employers to its provisions.  However, even if an employer is subject to the FLSA, not every employee falls under its provisions.  For example, executive, administrative and professional employees are exempt from the minimum wage and overtime provisions of the FLSA.

In addition to the FLSA, state wage and hour laws may also establish the minimum wage rate for the citizens of a particular state.  If an employer is subject to both federal and state law, the law that provides more protection to the employee will govern (i.e., the higher rate).  If a state has no minimum wage laws, the FLSA will govern covered employers.  Accordingly, most states either track the federal law or provide higher rates to their citizens.

More than half of the nation’s states have minimum wages higher than the current federal minimum wage, including Massachusetts ($7.50 currently and $8 effective January 1, 2008) and its neighboring states of Connecticut ($7.65), Maine ($6.75 currently and $7 effective October 1, 2007), Rhode Island ($7.40), and Vermont ($7.53).  On May 4, 2007, New Hampshire’s Governor John Lynch signed a bill into law raising its minimum wage from $5.15 per hour to $6.50 effective September 1, 2007 and to $7.25 on September 1, 2008.

If your organization has non-exempt employees subject to either state or federal minimum wage laws, we recommend that you audit your payroll practices to ensure that you are in compliance with any new rates that may affect your employees.  In addition, we recommend that you update your workplace posters to reflect these recent changes in the law.

As always, please feel free to call me with any questions you may have about which wage rates apply to your employees or other wage and hour issues generally.