WPI Wage Watch: Minimum Wage, Tip, & Overtime Developments (November Edition)

by Littler
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The dishes are done, the leftovers are gone, and you are back at work.  Were new laws enacted while you were conked out in a tryptophan-induced nap?  Keep reading for all the November updates about the minimum wage, tips, and overtime.

Preheat the Oven to 2019: With only one month remaining in 2018, employers must prepare for 2019. Separately, we published1 a rates-only update of known wage rate changes that will occur in 2019 concerning the minimum wage, the minimum cash wage and maximum tip credit for tipped employees, the minimum salary or fee amount exempt executive, administrative, and/or professional employees must receive, and the rate of pay for employees receiving commissions that qualify for the state equivalent of the FLSA’s 7(i) overtime exception.

Of course, the rates and states in the 2019 article might later change. State legislators have begun pre-filing bills for the upcoming 2019 legislative session. Kentucky BR 302 proposes to raise the minimum wage, on July 1, from $7.25 per hour to: $8.20 (2019); $9.15 (2020); $10.10 (2021); $11.00 (2022); $12.05 (2023); $13.10 (2024); $13.95 (2025); $15.00 (2026). It also proposes increasing the minimum cash wage for tipped employees from $2.13 per hour to: $3.05 (2020); $3.95 (July 1, 2021); $4.90 (2022). Finally, as proposed, it would allow local minimum wage ordinances.  This is notable because in 2016 the state supreme court invalidated local laws in Louisville-Jefferson County and Lexington-Fayette Urban County. Texas SB 113 proposes to increase the state minimum wage from $7.25 to $10.10 per hour.

In My Opinion: Around this time of the year opinions are not in short supply, be they from relatives, labor departments, or voters. The U.S. Department of Labor’s Wage and Hour Division issued an opinion letter addressing the circumstances under which an employee who is paid on an hourly, daily or shift basis (subject to a weekly guarantee) may qualify as an exempt executive, administrative, or professional employee under the Fair Labor Standards Act (FLSA),2 and re-issued and adopted a 2009 opinion letter to clarify how employers must pay tipped employees who perform dual jobs.3

At the November 6, 2018 election, voters in Cook County answered “yes” to an advisory (i.e., non-binding) question that asked whether their municipality should follow the countywide minimum wage ordinance. Prior to the election, the vast majority of jurisdictions opted out of coverage under the county law. It appears at least some municipalities may be heeding their constituents' “advice,” e.g., the Wilmette Board of Trustees voted unanimously to fully opt back into the law, the Glenview Board of Trustees will discuss the issue in December, and the Northbrook Board of Trustees will reconsider their decision in May 2019 if state legislative action does not occur.

Carve Up Compliance: The U.S. Department of Labor extended the Payroll Audit Independent Determination (PAID), its pilot compliance program aimed at helping employers correct past payroll mistakes so employees receive wages they earned.4

Investigations into alleged violations, and enforcement, of Chicago’s minimum wage ordinance may increase because the city council enacted an ordinance to create the Office for Labor Standards,5 which it hopes will facilitate more rigorous enforcement of the city’s employment ordinances.

How to Stuff a Bird (or Ballot Box): At the November 6, 2018 election, across the country voters decided the fate of numerous minimum wage ballot measures. Although the election occurred weeks ago, the results are not 100%. However, the to-date difference between “yes” and “no” votes is wide enough to report with confidence these measures’ approval.

  • In Flagstaff, Arizona, voters rejected Proposition 418, which sought to reduce the citywide minimum wage voters previously approved.
  • Arkansas voters approved Issue 5, which increases the state minimum wage, on January 1, from $8.50 per hour to $9.25 (2019), $10.00 (2020), and $11.00 (2021). Although the first increase is scheduled to occur on January 1, 2019, when the measure officially takes effect depends on when election results are certified. Technically it is possible the first increase could occur slightly after January 1. The ballot measure does not change the minimum cash wage covered tipped employees can be paid, $2.63 per hour, but the minimum wage increase impacts the maximum tip credit, which is the difference between the minimum cash wage and minimum wage.
  • Oakland, California6 voters approved Measure Z, which, beginning July 1, 2019, requires covered employees in the hotel industry to be paid $20.00 per hour if they do not receive health benefits through their employer; those that do can be paid $15.00 per hour if their employer pays $5.00 per hour toward health care benefits for the employee and the employee’s dependents. Measure Z also creates a new agency to enforce this law and other labor and employment laws in Oakland, such as the generally-applicable minimum wage ordinance (MWO).  Measure Z also increases penalties and damages for violations of the MWO (and other laws) and amends recordkeeping and employee-access-to-records requirements.
  • In Missouri, voters approved Proposition B, which, on January 1, will increase the $7.85 per hour state minimum wage to: $8.60 (2019); $9.45 (2020); $10.30 (2021); $11.15 (2022); and $12.00 (2023). For covered tipped employees, the minimum cash wage and maximum tip credit is 50% of the minimum wage if the direct wage received from an employer plus tips equal at least the state minimum wage.

Too Many Cooks (or Rates) in the Kitchen: In Saint Paul, Minnesota, a citywide minimum wage ordinance was enacted.7 The ordinance creates four rates that differ based on how many persons a business employs: more than 10,000 (macro business); more than 100 (large business), 100 or fewer (small business); and five or fewer (micro business). The law will apply to macro businesses first, beginning on January 1, 2020 ($12.50), and on July 1, 2020 it will apply to other businesses ($11.50; $10.00; $9.25). Macro businesses will be required to pay a $15.00 per hour minimum wage, beginning on July 1, 2022, whereas a $15.00 per hour rate will apply to other employers on July 1 in subsequent years: 2023 (large business); 2025 (small business); and 2027 (micro business). The macro business rate will be annually adjusted based on consumer-price-index changes, with the first increase occurring on January 1, 2023. For other businesses, the adjusted macro business rate will apply to them one year after they are subject to a $15.00 per hour minimum wage. Tipped employees must be paid the full citywide minimum wage, though lower rates may be paid generally, or for a limited period, to certain employees. The new law includes annual notice and record-keeping requirements; for employers that provide employee handbooks, the annual notice must be included in the handbook.

Invitation to Employer Party Includes “Plus 1”: The Montgomery County, Maryland County Council decreased the number of employees an employer must employ to be covered under the countywide minimum wage ordinance from two to one or more in addition to the owners. The change will take effect July 1, 2019.

Michigan’s Lame Turducken Session: As anticipated, in the post-election lame duck session, Michigan legislators introduced legislation to scale back citizen-initiated minimum wage amendments it adopted instead of letting voters decide the measure’s fate. Currently, the state’s legislative and executive branches are controlled by Republicans, though in 2019 the governorship will be held by a Democrat. SB 1171, which passed in the state senate, proposes to decrease the amount of preset future minimum wage increases – the minimum wage is scheduled to be $12.00 per hour in 2020, but would not reach that rate until 2030 under the proposal – to decrease the minimum cash wage covered tipped employees can be paid, and to not eventually eliminate the tip credit for tipped employees.

Please Pass the Political Hot Potato: Regularly we discuss the battle over District of Columbia Initiative 77, a June 2018 voter-approved ballot measure to gradually reduce, and later eliminate, the tip credit for tipped employees. Like family feuds around the holidays, the battle over this ballot measure has reignited. The D.C. Board of Elections was set to consider a proposed petition to repeal the Council of the District of Columbia’s repeal of Initiative 77. However, before it could, a lawsuit was filed that challenged the petition’s language, thereby delaying any potential referendum.

Gobbling up Feedback on Proposed Exemption Rules: Throughout November, the Washington State Department of Labor & Industries (LNI) held feedback sessions concerning pre-drafts of rules LNI will later propose.  The rules concern standards for determining whether an individual qualifies as an exempt executive, administrative, or professional employee.

Talking Turkey (if Turkey is Code for Minimum Wage): On his monthly talk show, Louisiana Governor John Bel Edwards (D) expressed his support for adopting a statewide minimum wage that would exceed the federal $7.25 per hour minimum wage. New Jersey State Senate President Steve Sweeney (D) said he was ready to meet with Governor Phil Murphy (D) and Speaker of the General Assembly Craig Coughlin (D) “to negotiate the details of a $15 minimum wage phase-in and to quickly pass the agreed-upon legislation to raise the wage.”

Home for the Holidaze? Minimum wage ordinances are like pie, in that you can never have enough; well, at least in Northern California’s San Francisco Bay Area where there are 19 generally-applicable citywide laws. Currently there are ordinances in the South Bay, the East Bay, and San Francisco. However, North Bay organizations are trying to convince city officials in Novato, Petaluma, Sonoma, Santa Rosa, and Sebastopol to make minimum wage ordinances an “All Bay, Every Day” kind of thing by adopting their own citywide standards.

Are House Republicans Ready to Break Bread with Democrats? The Republican-controlled House Education and the Workforce subcommittee will debate raising the federal minimum wage in a hearing titled “Mandating a $15 Minimum Wage: Consequences for Workers and Small Businesses.” Undoubtedly, Republicans may not go as far as some of their colleagues on the other side of the aisle may want – e.g., reports suggest that Senator Bernie Sanders (I-VT) will introduce a bill to prevent large companies from buying back stock unless their employees are paid at least $15 per hour, and House Democrats will hold hearings on the Labor Department’s efforts to change tipped employee rules – but the move by members of the soon-to-be-minority party could be an olive branch to their Democratic House (or Senate) mates, who are keen on addressing the federal minimum wage, which was last increased in 2009.

Leftovers: An Anaheim, California ballot measure approved by voters on November 6, 2018 establishes a minimum wage for employees of companies that accept city subsidies: $15.00 per hour on January 1, 2019, which increases $1.00 per hour annually in 2020, 2021, and 2022, with annual adjustments occurring in 2023 and future years. The measure highlights a compliance challenge employers face when determining the applicable minimum wage rate. For Wage Watch we focus primarily on generally-applicable minimum wage laws, but a wage floor may be set for employers because they operate in a certain industry, because they receive government subsidies, because they contract with or provide services to the federal, state, or local government, or because of where they operate, e.g., Denver’s Elections Division announced enough signatures were collected for the Denver Airport Minimum Wage Initiative to appear on the May 7, 2019 ballot.

We will continue to monitor and report on minimum wage and overtime developments as they occur.

 

Footnotes

1 See S. Libby Henninger and Sebastian Chilco, Minimum Wage, Tipped and Exempt Employee Pay in 2019: A Rates-Only Update, Littler Insight (Nov. 19, 2018).

3 To learn more, see Eli Freedberg, DOL Reissues 2009 Opinion Letter and Loosens Rules to Apply a Tip Credit to Employees Who Perform Side Work, Littler ASAP (Nov. 9, 2018).

4 To learn more, see Whitney Ferrer and Tammy McCutchen, DOL Extends PAID Program, Presenting Employers with "Third Option" to Release FLSA Claims, Littler ASAP (Nov. 6, 2018).

5 To learn more, see Kathryn Siegel and Haley Madel, Chicago City Council Creates Office of Labor Standards to Enforce Chicago’s Employment Ordinances, Littler ASAP (Nov. 13, 2018)

6 For more information, see Patrick Stokes and Bruce Sarchet, Oakland, California Passes Ballot Measure Targeting Hotel Employers and Creating New Enforcement Mechanisms for Employment-Related Ordinances, Littler Insight (Nov. 20, 2018).

7 To learn more, see Joe Weiner, Twins Once More: Saint Paul Passes $15 Minimum Wage Ordinance, Littler ASAP (Nov. 16, 2018).

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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