E-Alerts

Federal Minimum Wage Set To Increase On July 24, 2009

June 2009 by Sara Goldsmith Schwartz

On July 24, 2009, the federal minimum wage will increase from $6.55 to $7.25 per hour. This will be the final stage of a three-stage increase passed by Congress in 2007. Prior to 2007, the federal minimum wage had remained at $5.15 per hour for ten years.

Generally, employers in all states must pay the greater of the federal or state minimum wage to all nonexempt employees (exceptions to this general rule are discussed below). According to the U.S. Department of Labor (the “DOL”), the following 16 states have either no state minimum wage or a state minimum wage that is less than $7.25 per hour as of July 24, 2009, as indicated parenthetically. Consequently, employers in these states generally will be required to pay the new federal minimum wage once it goes into effect:

Alabama (no state minimum wage)
Alaska ($7.15 per hour)
Arkansas ($6.25 per hour for employers with four or more employees)
Delaware ($7.15 per hour)
Florida ($7.21 per hour)
Georgia ($5.15 per hour for employers with six or more employees)
Kansas ($2.65 per hour)
Louisiana (no state minimum wage)
Minnesota ($5.25 or $6.15 per hour, depending on the employer’s annual receipts)
Mississippi (no state minimum wage)
Missouri ($7.05 per hour)
Nevada ($6.55 per hour for employers that offer certain health benefits, and $7.55 per hour for employers that do not)
South Carolina (no state minimum wage)
Tennessee (no state minimum wage)
Wisconsin ($6.50 per hour)
Wyoming ($5.15 per hour)

Similarly, the DOL reports that the following 15 states are expected to raise their state minimum wage to $7.25 per hour on July 24, 2009, to keep pace with the change in federal law. Accordingly, employers in these states, too, generally will be required to pay the higher rate. The present state minimum wage in each of these locations is indicated parenthetically:

Idaho ($6.55 per hour)
Indiana ($6.55 per hour for employers with two or more employees)
Maryland ($6.55 per hour)
Montana ($4.00 or $6.90 per hour, depending on the employer’s gross annual sales)
Nebraska ($6.55 per hour)
New Jersey ($7.15 per hour)
New York ($7.15 per hour)
North Carolina ($6.55 per hour)
North Dakota ($6.55 per hour)
Oklahoma ($6.55 per hour for employers with ten or more full-time employees at any one location and for employers with annual gross sales of over $100,000 irrespective of the number of full-time employees; $2.00 per hour for all other employers, who will not be affected by this state law increase)
Pennsylvania ($7.15 per hour)
South Dakota ($6.55 per hour)
Texas ($6.55 per hour)
Utah ($6.55 per hour)
Virginia ($6.55 per hour for employers with four or more employees)

As the vast majority of minimum-wage earners in the 31 states listed above will be entitled to a pay raise on July 24, 2009, employers operating in these states, and multi-state employers in particular, should take immediate steps to make any adjustments that may be required.

By contrast, DOL records indicate that the following 20 states and theDistrict of Columbiaalready have state minimum wages that equal or exceed $7.25 per hour. Accordingly, employers in these states are generally not expected to be affected by the scheduled increase in the federal minimum wage:

Arizona ($7.25 per hour)
California ($8.00 per hour)
Colorado ($7.28 per hour)
Connecticut ($8.00 per hour)
District of Columbia ($7.55 per hour)
Hawaii ($7.25 per hour)
Illinois ($8.00 per hour for employers with four or more employees, excluding family members)
Iowa ($7.25 per hour)
Kentucky ($7.25 per hour)
Maine ($7.25 per hour)
Massachusetts ($8.00 per hour)
Michigan ($7.40 per hour for employers with two or more employees)
New Hampshire ($7.25 per hour)
New Mexico ($7.50 per hour)
Ohio ($7.30 per hour)
Oregon ($8.40 per hour)
Rhode Island ($7.40 per hour)
Vermont ($8.06 per hour for employers with two or more employees)
Washington ($8.55 per hour)
West Virginia ($7.25 per hour for employers with six or more employees at one location)

As you can see, in some cases where the state minimum wage exceeds the federal rate, the higher rate applies only to employers that meet certain criteria.

Significantly, in certain situations, the federal minimum wage law does not apply, permitting employers to pay the lower state minimum wage, or in the case of a state that has no minimum wage law, no minimum wage at all, giving relevancy to the lower state rates. In this regard, the federal minimum wage law exempts certain categories of workers (e.g., employees engaged in fishing operations) from its minimum wage requirement and does not apply when either the employer or the employee does not satisfy certain minimal criteria demonstrating that the work involves interstate commerce.

However, the exceptions to the general rule that employers must pay the greater of the federal or state minimum wage are nuanced and narrow, so employers that are paying less than the federal minimum wage in certain locations or to certain categories of employees are urged to take immediate steps to ensure compliance with the applicable wage and hour laws.

Please do not hesitate to contact us if you have questions about the new federal minimum wage or if you need assistance in determining your company’s wage and hour obligations.