It’s hard to fathom today, but, when the Fair Labor Standards Act (FLSA) first became law in 1938, the federal minimum wage was $0.25 an hour. We’ve certainly seen many amendments over the years, but the last increase, which brought the federal minimum wage to $7.75 an hour, occurred over a decade ago. Evolving and outstanding federal legislation, in conjunction with recent state minimum wage increases, has presented today’s employers and HR personnel with preparation and compliance considerations.
Although a provision to raise the federal minimum wage was included in the coronavirus relief bill proposed by the House in February, the provision did not pass the Senate. Ultimately, the provision was not included in the American Rescue Plan Act of 2021 , which was enacted on March 11, 2021.
“President Biden is disappointed in this outcome, as he proposed having the $15 minimum wage as part of the American Rescue Plan,” stated White House Press Secretary Jen Psaki. “He respects the parliamentarian’s decision and the Senate’s process. He will work with leaders in Congress to determine the best path forward because no one in this country should work full time and live in poverty.”
Where does legislation to raise the federal minimum wage stand?
Even though the provision didn’t pass a Senate vote, other legislative efforts are in motion. Ultimately, it’s a waiting game.
The Raise the Wage Act of 2021 (the Act) is the latest iteration from House and Senate leaders of legislation introduced in 2019, which was reintroduced in January. In general, the Act would gradually increase the federal hourly minimum wage to $15.00 an hour by 2025 and increase it in line with median hourly wage growth beginning in 2026. The Act would raise the minimum wage of tipped workers to $4.95 in 2021 and by roughly $2 per hour annually until 2025. The Act would also end the subminimum federal wage for disabled workers and allow for full federal minimum wage benefits for teenage workers.
On February 23rd, Republican Senators Mitt Romney and Tom Cotton introduced the Higher Wages for American Workers Act, alternate legislation that would increase the federal minimum wage to $10 per hour by 2025 and automatically every two years thereafter to match the rate of inflation. This bill also includes an employer mandate to use E-Verify to ensure all wages are going to legal workers.
Missouri Senator Josh Hawley also announced his plans to introduce legislation to increase wages with his Blue-Collar Bonus Tax Credit, which would provide workers with quarterly payments from the IRS to make up for 50% of the difference between a median wage (set at $16.50 and adjusted for inflation) and the worker’s hourly wage rate for a maximum of 40 hours per week. The credit would phase out at the median wage.
The wheels are already in motion for federal workers. President Biden signed an Executive Order to protect the federal workforce on January 22, 2021, which, among other things, states, “The Director of OPM shall provide a report to the President with recommendations to promote a $15/hour minimum wage for federal employees.” The President also plans to issue an Executive Order requiring federal contractors to pay a minimum wage of $15.00 an hour and provide emergency paid leave to workers.
What does the current state landscape look like for minimum wage?
In 2021, more than 20 states are set to raise their minimum wage requirements (this includes 5 states in New England, but we’ll delve deeper into that later on). Some states, including Alabama, Louisiana, Mississippi, South Carolina, and Tennessee, abide by federal minimum wage for employers subject to the FLSA and do not have separate state minimums. California currently holds the highest state-wide baseline in the US with a rate of $14 an hour for employers of 26 or more employees (the minimum wage for CA employers of 25 or fewer employees is $13.00 per hour) and has established law that increases the minimum wage annually until it reaches $15.00 an hour in 2023 and on a set schedule, adjusted annually thereafter. Workers in the District of Columbia already receive a minimum of $15.00 an hour. With a minimum wage of $5.15 an hour (unless subject to the FLSA), employers in Georgia and Wyoming currently have the lowest minimum wage requirement.
What’s happening at the state level for New England employers?
Minimum wage laws don’t only differ at the state, county, city, or town level; the employer requirements may be different across groups, such as tipped employees or minors. While the list is not all-inclusive, here are some of the state level minimum wage requirements in New England.
- Massachusetts – On January 1st, MA workers saw a $0.75 increase, which brought the Commonwealth’s minimum wage to $13.50. The minimum wage for MA employees who receive more than $20 a month in tips increased to $5.55 per hour. MA is already on track to increase the minimum wage to $15.00 ($6.75 for tipped employees) by January 1, 2023. Current MA State Law on minimum wage states the MA minimum wage may not be less than $0.50 higher than the effective federal minimum rate.
- Rhode Island – As of October 2020, RI’s minimum wage is $11.50 an hour, and the minimum wage for wait staff increased to $3.89 per hour. In January, RI lawmakers proposed legislation that would raise the minimum wage to $15.00 by October of 2024.
- Vermont – VT minimum wage increased by $0.79 to $11.75 on January 1st. The minimum wage for employees receiving more than $120.00 a month in tips increased to $5.88. If the federal minimum wage rate becomes higher, VT will automatically adjust to the federal minimum wage.
- Maine – ME increased the minimum wage by $0.15 to $12.15 on January 1st. For service employees receiving more than $30 a month in tips, the minimum wage increased to $6.08 per hour. Current ME State Law states the minimum will increase on the same date and to the same amount as a federal minimum wage in excess of the current ME minimum wage.
- Connecticut – CT is scheduled to increase by $1 to $13.00 an hour in August 2021. CT’s minimum wage is set to automatically increase to 0.5% above the FLSA rate if the federal minimum wage rate equals or exceeds the CT minimum, meaning CT’s minimum wage will reach $15.00 by June 1, 2023. For minors, the minimum wage is equal to 85% of CT minimum wage during their first 200 hours of employment (currently $11.05).
- New Hampshire – NH’s minimum wage is currently $7.25. The State aligns with the federal minimum wage. The minimum wage for tipped workers receiving more than $30 per month in tips is 45% of the minimum wage, which is $3.27 per hour currently. In January, NH lawmakers introduced legislation proposing an increase to $22.50 an hour; however, the bill is already raising concerns since it suggests such a significant increase.
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*The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information is for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information. This article contains links to other third-party websites provided only for the convenience of the reader.