With the November election results (finally) in the rear view, businesses should be prepared to comply with upcoming minimum wage increase obligations, including increases resulting from the election. Specifically, companies with operations in Arkansas and Missouri must be aware that in the recent election, voters chose to increase their state minimum wage rates as of January 1, 2019. Arkansas increased its minimum wage from $8.50/hour to $9.25/hour on January 1, 2019 and will increase the rate to $11.00/hour by January 1, 2021. Missouri voters approved an increase from $7.85/hour to $8.60/hour on January 1, 2019 and to $12.00/hour over the next five years.
As shown in the below chart, twenty-one states are slated to increase their minimum wage rate at either the turn of the calendar or in the months following.
|State||2019 MW Increase (effective date)|
|Delaware||$8.75 (1/1/19); $9.25 (10/1/19)|
|District of Columbia||$14.00 (7/1/19)|
|New Jersey||$8.85 (1/1/19)|
|New York||$11.10 (12/31/18)|
|Rhode Island||$10.50 (1/1/19)|
|South Dakota||$9.10 (1/1/19)|
Although the federal minimum wage rate of $7.25/hour has not been raised since 2009, twenty-nine states and the District of Columbia have implemented a minimum wage higher than the federal rate. In the remaining twenty-one states, the federal minimum wage continues to apply. In addition, forty-two municipalities have adopted minimum wages above their respective state minimum wage rate. The minimum tip credit is also being increased in certain states, and if companies utilize the tip credit, they should be aware of corresponding state increases.
As in Arkansas and Missouri, most states have adopted measures to annually increase the minimum wage based on various economic factors. Typically, the increases are computed by a formula tied to the consumer price index. The rate increases – particularly in a state such as Arkansas where the cost of living is relatively low – indicate a considerable surge in compensation for minimum wage employees. While every statewide minimum wage ballot initiative has passed since 1996, the resulting fallout may be problematic for businesses.
For employers expecting to face challenging minimum wage increases, companies may want to contemplate employing temporary or seasonal workers, restructuring staffing to reduce overtime compensation, hiring fewer employees overall, or potentially increasing prices to pass on to customers to offset rising labor costs. In addition to minimum wage hikes, with unemployment at the lowest rate the U.S. has seen in fifty years, companies may contemporaneously feel pressure to increase wages and competitive benefits packages to attract viable candidates.
While the concept of minimum wage is fairly straightforward, questions arise regarding whether a worker is an employee (entitled to minimum wage) or independent contractor or whether an exception/exemption from the requirements exists. If an employer is not complying with minimum wage requirements, the company (and potentially an individual) could be subject to liability in the form of back pay, liquidated (double) damages, civil penalties, and/or resulting attorneys’ fees. Employers should consult with legal counsel regarding whether any issues exist in a state with a minimum wage requirement above the federal level.