- What is the Minimum Wage?
- July 4, 2014
- Law Firm: McMahon Berger A Professional Corporation - St. Louis Office
It seems like a question with a simple answer: $7.25 per hour, right? Maybe not. If you are an employer looking to avoid a costly Department of Labor investigation and possible fines, or a lawsuit by current and former employees, it pays to get the right answer.
The current federal minimum wage required by the Fair Labor Standards Act (FLSA) is, indeed $7.25 per hour; though that may change as increasing the minimum wage has been a recent priority for the White House and many in Congress. But the federal minimum wage may not be the only minimum wage with which an employer must comply.
Employers are also required to comply with state minimum wage laws. Currently, forty-five (45) states have their own minimum wage requirements separate from the FLSA’s $ 7.25 per hour. Twenty two (22) of those states have a state minimum wage that is higher than the $7.25 federal standard. Missouri’s current minimum wage is $7.50 per hour, and Illinois workers are entitled to at least $8.25 per hour. While Washington state has the highest state minimum wage, requiring $9.32/hour for most employers, that may change, as Massachusetts appears poised to raise its minimum wage to $11.00 per hour by 2017. Other state legislatures such as California, Connecticut and Maryland, have also passed laws to increase their minimum wages over the coming years. If you are an employer in one of these twenty-two (and counting) states, you will almost certainly be required to pay this higher state minimum wage to employees.
Unlike debates over the Federal minimum wage, which employers often hear about in the news, state minimum wage rate increases sometimes occur with little fanfare; with the result that employers may be unaware that they now have to pay more to employees. Indeed, the minimum wage rates of at least ten states are tied to the Consumer Price Index; which means that no legislative action at the state level is required before the minimum wage in those states goes up.
But it doesn’t stop there. In many states, municipalities can set a minimum wage above-and-beyond the minimum wage of the state where they are located. In Seattle, Washington, the City Council voted this month to increase the minimum wage of some employers to $15.00 per hour over the next three years. San Francisco already requires $10.74 per hour for most employees. Other municipalities across the country will likely follows suit in coming years.
Even if you happen to be an employer in a state or municipality which does not require a minimum wage above the federal $7.25 per hour, you may be required to pay a higher minimum wage if you are considered a federal contractor. Unable to get Congress to raise the minimum wage, President Obama issued an executive order requiring federal contractors to pay workers $10.10 per hour. Last Thursday (June 12, 2014), the Labor Department issued final rules relating to that order, meaning that the new minimum wage would be required of employers receiving federal contracts after January 1, 2015.
Violating these separate federal, state and local minimum wage laws can expose an employer to crippling costs. Not only will an employer be saddled with the cost of defending the lawsuit, if found liable, the employer will often have to pay the difference in unpaid wages, penalties, and the attorneys’ fees for those suing them. Wage and hour lawsuits have been on the rise for several years, and there appears to be no change in the trend for the foreseeable future. Employers who ensure they are complying with minimum and other wage and hour law requirements will serve themselves well by making certain they are complying with these ever-evolving obligations.