Minimum wage laws can affect businesses of all sizes, whether operating nationwide, in multiple jurisdictions, or only in one state, county, or city. To help manage this challenge, below we provide a rates-only update that details scheduled state- and local-level wage increases throughout 2021 so employers can determine the minimum amount they must pay non-exempt, tipped, and certain exempt employees. Before we chart out the 2021 rates, however, we briefly highlight rate changes that occurred in fall 2020, November 2020 ballot measures, and a unique 2021 issue in New Mexico. Note that pending or future legislation might change minimum wage rates that will apply in 2021, so we recommend employers monitor legislative developments and consult with counsel to confirm rates did not change since publication.

Fall 2020 Changes

Before we look forward to 2021, let’s take a quick look at minimum wage-related changes that took effect in the latter part of 2020:

• On September 1, 2020, the minimum wage in Connecticut increased from $11.00 to $12.00 per hour. For tipped employees, though the minimum cash wage remained $6.38 (tipped hotel or restaurant employee) and $8.23 (bartender) per hour, the maximum tip credit increased from $4.52 to $5.62 per hour, and $2.77 to $3.77 per hour, respectively.
• On September 21, 2020, Burlingame, California, in Northern California’s San Francisco Bay Area, enacted a local minimum wage ordinance, which will become operative on January 1, 2021 (rate noted below).
• On October 1, 2020, the minimum wage in Rhode Island increased from $10.50 to $11.50 per hour. For tipped employees, although the minimum cash wage remained $3.89 per hour, the maximum tip credit increased from $6.61 to $7.61 per hour.
• On November 1, a new $14.00 per hour minimum wage for long-term care facility direct care staff took effect in New Jersey. On September 16, 2020, Governor Phil Murphy (D) signed A4482, creating the new statewide minimum wage for these workers, which must be $3.00 per hour greater than the applicable general state minimum wage (2021 change noted below).

November 2020 Ballot Measures

At the November 3, 2020 election, voters decided the fate of one statewide and two local ballot measures concerning the minimum wage. At the time of publication, though not necessarily officially certified, it appears voters approved the following three measures:

In Florida, Amendment 2 establishes a $10.00 per hour minimum wage on September 30, 2021, which will increase $1.00 per hour each subsequent September 30 until the minimum wage reaches $15.00 per hour on September 30, 2026. On September 30, 2027, and each subsequent September 30, the state will annually adjust the minimum wage based on changes to the consumer price index (CPI).¹

Less than one month before voters went to the polls, the Florida Department of Economic Opportunity announced an annual CPI adjustment to take effect on January 1, 2021 ($8.65 per hour), as it was required to do under the state constitution before the amendments. Materials accompanying the ballot measure do not discuss the affect, if any, of the ballot measure’s amendments on the Department’s adjustment (e.g., Amendment 2 says the state will annually adjust the rate beginning on September 30, 2027). Accordingly, for the time being, unless the Department revises its mandatory poster to state otherwise, it appears the pre-ballot measure increase will be in effect from January 1 through September 29, 2021, followed by ballot measure amendments on September 30, 2021.

Portland, Maine voters approved Question A, which increases the citywide minimum wage in future years, on January 1, to $13.00 (2022), $14.00 (2023), and $15.00 per hour (2024). Each January 1 afterwards, the city will annually adjust the minimum wage based on changes to the CPI. Additionally, the ballot measure changes the minimum cash wage for tipped employees standard from half the state minimum to half the local minimum wage.

Notably, the ballot measure creates a special minimum wage rate – 1.5 times the minimum wage – for work employees perform during a declared emergency; however, the increased minimum wage rate does not apply to telework. Although there was disagreement over whether this rate would take effect immediately, once the amendments become official, the city initially said the “declared emergency minimum wage” does not apply until 2022. However, after that announcement, the city held further meetings with legal staff, so employers should monitor this development in case the city’s position changes.

In Rockland, Maine, voters approved a new minimum wage ordinance that will become operative on January 1, 2022, at which time covered employees must receive a $13.00 citywide minimum wage. Preset increases to the minimum wage will occur on January 1 in 2023 ($14.00) and 2024 ($15.00). Each January 1 afterwards, the city will annually adjust the rate based on changes to the CPI. For tipped employees, the ordinance allows employers to apply a tip credit of up to half the applicable minimum wage. Additionally, the ordinance contains notice requirements concerning the tip credit, and discusses service charges, credit card tips, and tip pooling.

New Mexico, New Year, New Issues: State Rate Exceeds Various Local Rates in 2021

Essentially, local minimum wage ordinances are a response to low or unchanging federal or state minimum wage rates. A city or county enacts a law to set a minimum wage rate that exceeds that set by federal and state law. Although this logic remains true concerning the federal minimum wage, which has remained $7.25 per hour since July 24, 2009, in recent years more states have taken steps to increase their rates. Moreover, many have established rate increases across multiple years, sometimes followed by annual adjustments based on CPI changes. As a result, the state rate could exceed the local rate. In 2021, this will occur in New Mexico when the state minimum wage increases from $9.00 to $10.50 on January 1, 2021. This development creates unique issues for employers subject to local minimum wage ordinances in Albuquerque, Bernalillo County, and Las Cruces.

Currently, these three jurisdictions’ ordinances require an annual adjustment to their local minimum wage based on CPI changes. Moreover, all adjusted rates take effect on January 1. Bernalillo County announced the CPI adjustment would increase the local minimum wage from $9.20 to $9.35, more than $1 per hour less than the 2021 state minimum wage. However, in their CPI-adjustment announcements, Albuquerque and Las Cruces say the local minimum wage will increase to $10.50 per hour, i.e., the state minimum wage. But, neither city’s minimum wage, when adjusted according to the formula the ordinances establish, produces a $10.50 per hour outcome. Rather, Albuquerque’s minimum wage would increase from $9.35 to $9.50 per hour, and Las Cruces’ would increase from $10.25 to $10.45 per hour. Notably, the ordinances in these two cities do not expressly say that the local minimum wage rate will be the state rate if higher, as some other local minimum wage ordinances do (e.g., Cook County, IL; Portland, ME; Montgomery County, MD; Saint Paul, MN).

For employers with tipped employees in Albuquerque and Las Cruces, another related wrinkle arises. In Albuquerque and Las Cruces, employers must pay tipped employees a minimum cash wage (MCW) that is no less than 60% or 40% of the applicable minimum wage, respectively. When making their annual adjustment announcements, the cities based their MCW on the state minimum wage, rather than what the adjusted local minimum wage would be. Albuquerque says the 2021 MCW will be $6.30 (rather than $5.70) and Las Cruces says the 2021 MCW will be $4.20 (rather than $4.18). Note, however, even using the lower statutory CPI-adjustment MCW, both would exceed the state’s 2021 MCW of $2.55 per hour.

Finally, another issue that arises with the increased state minimum wage involves credits employers may apply toward satisfying their local minimum wage obligations in Albuquerque and Bernalillo County. In both jurisdictions, employers may pay employees $1 per hour less than the general minimum wage if they provide a certain level of health and/or childcare benefits. However, this would result in paying employees less than the state minimum wage.

2021 Minimum Wage Increases²

First, we highlight state, counties, and cities where the minimum wage will increase in 2021. If the rate will not change, we do not include that information. Please note that some – but not all – New York rates may also increase on December 31, 2021, but for this article we focus on the New York rates that will apply every day in 2021 except December 31, 2021. Additionally, information concerning Albuquerque, Bernalillo County, and Las Cruces, New Mexico is not included in the below chart.

2021 Tipped Rate Increases

Next, we highlight state, counties, and cities where, for tipped employees, the minimum cash wage and/or tip credit will increase in 2021. Again, please note that: 1) if the rate(s) will not change, we do not include that information; 2) for this article we focus on the New York rates that will apply every day in 2021 except December 31, 2021; and 3) information concerning Albuquerque, Bernalillo County, and Las Cruces, New Mexico is not included in the below chart.

In certain places, employers may be able to count tips an employee receives toward the minimum wage. In these jurisdictions, if the direct wage and tips an employer pays an employee equals the minimum wage, an employer satisfies its minimum wage obligation. However, if the direct wage plus tips does not equal the minimum wage, an employer must pay the employee the difference. Directly below we highlight the minimum cash wage (MCW) that may be paid, and the maximum tip credit (TC) employers can claim, for covered tipped employees, as well as the amount of the increase. Please note that in the following states with 2021 rate increases, tip credits are prohibited (so they are not included below): Alaska; California; Minnesota; Montana; Nevada; New York (Employees outside the hospitality wage order only);Oregon; and Washington State. Finally, because New York has varying standards, we include the numbers in a standalone section after the below chart.

New York Tip Rates

Tipped employee standards can be more complicated in New York, so we give the Empire State its own section. First, we discuss generally applicable tip standards, then standards that apply in the hospitality industry, which vary depending on an employee’s role and the place of employment.

Note that some – but not all – New York rates will also increase on December 31, 2021. However, for this article we focus on the New York rates that will apply in every day in 2021²⁸ except December 31, 2021.

Generally (Outside Hospitality Wage Order): Beginning on December 31, 2020, employers cannot apply a tip credit, and employees must be paid the full minimum wage (see chart above).

Hospitality Industry

Service Employee: An employer must directly pay a service employee at least the hourly Cash Wage (CW), and cannot claim a tip credit that exceeds the hourly Tip Credit rate (TC). However, an employer’s ability to claim the tip credit is dependent on an employee’s weekly tip average equaling at least the hourly Tip Threshold (TT) (or TT(R) for resort hotel service employees) and an employee’s direct wage plus tips equaling or exceeding the minimum wage.

Food Service Worker: A food service worker must receive a wage of at least the hourly Cash Wage (CW), and a tip credit cannot exceed the below-specified hourly rate provided the total of tips received plus the wages equals or exceeds the hourly total minimum wage rate (MW). Employers cannot claim a tip credit for fast food employees.

Exempt Employees

Notwithstanding the minimum amount³² employers must pay executive, administrative, and professional employees for these workers to be exempt from the federal Fair Labor Standards Act’s (FLSA) minimum wage and overtime requirements, currently at least seven states have pay requirements that will exceed the revised federal standard in 2021: Alaska, California, Colorado, Maine, New York State (executive or administrative),³³ Pennsylvania, and Washington State. Of course, it remains possible other states could join this list.

Under some state laws, these employees are exempt only from overtime requirements, meaning employers must pay them at least the state minimum wage for all hours worked, and many of these state minimum wage rates will increase in 2021. Additionally, in 2021, there will be state law increases in the minimum hourly pay required to qualify for the state-law equivalent of the FLSA’s 7(i) retail or service establishment overtime exemption for employees paid commissions. Below we discuss these pay-related 2021 changes.

Executive, Administrative, or Professional Exemption Minimum Pay Increases

Under the FLSA, to be a bona fide executive, administrative, or professional employee, employer must compensate the individual on a salary or fee basis (only for administrative and professional employees) at least $684 per week, excluding board, lodging, or other facilities. Employers may translate the $684 a week amount into equivalent amounts for periods longer than one week: $1,368 (Bi-weekly); $1,482 (Semi-monthly); $2,964 (Monthly); $35,568 (Annual). Various states' minimum salary or fee amounts exceed the federal rate, and in 2021, these pay requirements will change.

Note that the some – but not all³⁴ – New York rates will also increase on December 31, 2021, but for this article we focus on the New York rates that will apply every day in 2021 except December 31, 2021.

Computer & Medical Professional Minimum Pay Increases

In various states, the pay rates for exempt computer employees will continue to, or for the first time exceed, the rate the federal FLSA requires:

• California: The law provides that certain computer software employees are exempt from state overtime requirements if they receive a minimum hourly, monthly, or yearly rate, which is determined annually based on cost-of-living changes. Effective January 1, 2021, the computer software employee minimum hourly rate will increase from $46.55 to $47.48 per hour, the minimum monthly salary amount will increase from $8,080.71 to $8,242.32, and the minimum annual salary amount will increase from $96,968.33 to $98,907.70.
• Colorado: Employees in highly technical computer-related occupations must receive at least the lesser of the applicable salary noted above or hourly pay that is at least $28.38 in 2021.
• Washington State: 2021 will mark the first complete calendar year in which exempt computer employees paid on an hourly basis earn more than the FLSA's $27.63 per hour rate. From July 1 through December 31, 2020, the hourly rate for employees was the same as the FLSA rate if the employee worked for an employer with 50 or fewer employees. However, on January 1, 2021, the rate will increase to 2.75 times the $13.69 per hour state minimum wage: $37.6475. If in the latter half of 2020 a computer employee worked for an employer with 51 or more employees, the pay rate was 2.75 times the then-applicable $13.50 per hour minimum wage: $37.125 per hour. However, in 2021 there will be an increase to both the multiplier (3.5) and the minimum wage ($13.69), producing a rate of $47.915 per hour.

California law also provides that licensed physicians and surgeons are exempt from state overtime requirements if they receive a minimum hourly rate, which is determined annually based on cost-of-living changes. Effective January 1, 2021, for licensed physicians and surgeons, the minimum hourly rate of pay will increase from $84.79 to $86.49.

White Collar Employees Covered by Minimum Wage

In various states, executive, administrative, or professional employees are exempt from state overtime requirements, but not exempt from state minimum wage requirements. In these jurisdictions, such employees must earn at least the applicable minimum wage for each hour worked in a workweek. The minimum wage in some of these states will increase on January 1, 2021:⁴² Arizona ($12.15); Illinois ($11.00); Massachusetts ($13.50); New Jersey ($12.00 under the general rate; $11.10 for small employers; $10.30 for seasonal employers); and South Dakota ($9.45). Additionally, on May 1, the Virginia minimum wage will increase to $9.50 per hour, and on July 1, the Nevada minimum wage will increase to $9.75 or $8.75 per hour, depending on whether an employer offers health benefits. Note that in two aforementioned states – Arizona and Illinois – local minimum wage rates may apply (see above).

Additionally, in a handful of states, outside sales employees are not exempt from state minimum wage requirements. In these jurisdictions, such employees must earn at least the applicable minimum wage for each hour worked in a workweek. The minimum wage in some of these states will increase in 2021,⁴³ e.g., in Arizona the minimum wage will increase to $12.15 on January 1, and on July 1 the Nevada minimum wage will increase to $9.75 or $8.75 per hour, depending on whether an employer offers health benefits. Note that in Arizona, local minimum wage rates may apply (see above).

Commissioned Employee Overtime Exemption

To qualify under the FLSA’s 7(i) overtime exception, the regular rate of pay for an employee of a retail or service establishment must exceed one-and-a-half times the federal minimum wage, and more than half the employee’s compensation for a representative period (not less than one month) must represent commissions on goods or services. In the following states with 2020 rate changes, the 7(i)-type exemption requires – in part – an employee’s pay to either equal or exceed one-and-a-half times the state minimum wage.⁴⁴

California: An employee’s earnings must exceed one-and-a-half times the state minimum wage, which on January 1, 2021, will increase to $14.00 per hour for employers with 26 or more employees and to $13.00 per hour for employees with 25 or fewer employees.

Colorado: An employee’s regular rate of pay must be at least one-and-a-half times the state minimum wage, which on January 1, 2021, will increase to $12.32 per hour.

Connecticut: An employee's regular rate of pay must exceed two times the state minimum wage, which on August 1, 2021, will increase to $13.00 per hour.

District of Columbia: An employee’s regular rate of pay must exceed one-and-a-half times the district minimum wage, which on July 1, 2021, will be annually adjusted from its current $15.00 per hour rate.

Minnesota: An employee’s regular rate of pay must exceed one-and-a-half times the state minimum wage, which on January 1, 2021, will increase to $10.08 per hour for employers with $500,000 in annual gross sales, and to $8.21 per hour for employers with less than $500,000 in annual gross sales, and certain hotels.

Nevada: An employee’s regular rate must exceed one-and-a-half times the state minimum wage, which on July 1, 2021, will increase to $9.75 per hour if an employer does not offer health benefits or $8.75 per hour if an employer offers health benefits.

New York: The general wage order⁴⁵ provides – in part – that employers must pay an employee for overtime at a wage rate of one-and-one-half times the employee's regular rate in the manner and methods provided in and subject to the exemptions of section 7 of the FLSA. However, it is unclear whether employers must base payment on the federal or state minimum wage. If the state minimum wage, the wage rate will increase on December 31, 2020. In New York City, the minimum wage will remain $15.00, whereas the minimum wage in Nassau, Suffolk, and Westchester Counties will increase to $14.00, and, in the remainder of New York State, the minimum wage will increase to $12.50. Please note the some New York rates may also increase on December 31, 2021.

Oregon: An employee’s regular rate of pay must exceed one-and-a-half times the state minimum wage, which on July 1, 2021, will increase to $14.00 per hour (urban), $12.75 per hour (general), and $12.00 per hour (non-urban).

Washington: An employee’s regular rate of pay must exceed one-and-a-half times the state minimum wage, which on January 1, 2021, will increase to $13.69 per hour.

Footnotes