On June 26, 2014, Massachusetts Governor Deval Patrick signed into law legislation that will significantly increase the state’s minimum wage for hourly and tipped workers over the next three years. The current Massachusetts minimum wage of $8.00 per hour will increase to $11.00 per hour by the start of 2017 in three, graduated steps: (1) $9.00 per hour as of January 1, 2015; (2) $10.00 per hour as of January 1, 2016; and (3) $11.00 per hour as of January 1, 2017. This 38 percent increase puts Massachusetts on pace to well exceed President Obama’s announced goal of a federal minimum wage of $10.10 per hour. The $11.00 per hour rate would be one of the highest minimum wage rates in the United States, based on current scheduled state wage increases, exceeded only by the District of Columbia and certain municipalities.

The new law will also increase the minimum wage for tipped hourly workers by 43 percent in total. Specifically, the law calls for the tipped minimum wage to increase from $2.63 per hour to $3.75 per hour by 2017, also in three steps: (1) $3.00 per hour as of January 1, 2015; (2) $3.35 per hour as of January 1, 2016; and (3) $3.75 per hour as of January 1, 2017.

The law also includes reforms to the Massachusetts unemployment insurance system that aim to stabilize unemployment insurance premium rates for businesses and prevent those rates from spiking. The new rate structure is also designed to provide lower rates for employers with less employee turnover.

Employers with Massachusetts employees who are paid tipped wages or hourly at the minimum wage should begin preparing now for the annual increases that begin on January 1, 2015.

Note: This article was published in the June 27, 2014 issue of the Massachusetts eAuthority.