Today, in a special meeting called by Mayor Rahm Emanuel, the Chicago City Council approved an ordinance to raise the minimum wage to $10.00 per hour by next summer with incremental increases to $13.00 per hour by July 1, 2019.

Over the summer, we noted that Mayor Emanuel filed a proposed ordinance to increase the minimum wage to $13.00 per hour by June 1, 2018. Mayor Emanuel’s amended ordinance increases the minimum wage as follows:

• $10.00 per hour by July 1, 2015;
• $10.50 per hour by July 1, 2016;
• $11.00 per hour by July 1, 2017; 
• $12.00 per hour by July 1, 2018; and
• $13.00 per hour by July 1, 2019.

Beginning on July 1, 2020, minimum wage increases will be annual and automatic, indexed to the rate of inflation as measured by the Consumer Price Index (CPI) for All Urban Consumers. However, increases are capped at 2.5%, and there will be no annual increase if Chicago’s unemployment rate was 8.5% or higher in the preceding year. The Chicago ordinance merely sets a minimum wage floor, and an Illinois or national minimum wage would control if either exceeds Chicago’s wage.

Additionally, the Chicago ordinance increases wages for tipped employees. Under the Illinois Minimum Wage Act, employers receive a “tip credit” and can pay their tipped employees an hourly wage as low as $4.95, so long as those employees make at least minimum wage including their tips. The new Chicago ordinance requires Chicago employers to pay tipped employees an extra $0.50 above the Illinois tip credit by July 1, 2015, and an additional $1.00 above the tip credit by July 1, 2016. Beginning on July 1, 2017, the minimum wage for tipped employees will be indexed to inflation using the same CPI measurement as regular wages.

Mayor Emanuel and the City Council moved quickly, as speculation swirled that minimum wage legislation in the Illinois General Assembly would preempt home rule municipalities, including Chicago, from raising their local minimum wages above the state level. Although the General Assembly retains the authority to preempt home rule in the future, legislators may be reluctant to pass legislation what would be a de facto decrease in Chicago’s minimum wage.

The General Assembly may still consider a state-wide increase in the minimum wage, with or without preemption. Last week, the Senate Executive Committee recommended for passage an amendment to Senate Bill 68 that would increase the state minimum wage to $11.00 per hour by 2018. Today’s Chicago City Council vote may reduce the odds of an increase during the veto session, or during the brief “lame duck” session in January before Governor-elect Rauner’s inauguration. Rauner campaigned against a stand-alone increase in the minimum wage.  Therefore, if the Assembly does not act before Rauner takes office on January 12, any minimum wage increase might have to be part of a broader package that includes pro-business initiatives favored by Rauner, including but not limited to workers’ compensation reform.