Never Mind the Feds: States Do Their Own Thing on Minimum Wages

Not only has California raised minimum wage rates in 2018, but other states across the country have passed increases as well. In Vermont, for instance, the minimum wage went up from $10 per hour to $10.50. New York has gone from $9.70 to $11.10. In some states, various municipalities have different rates from the state as a whole. It’s clear that following minimum wage laws is complex for every business.

As of 2017, more than half the states had minimum wages above the federal minimum of $7.25 per hour. Some see the increase as mirroring shifting politics and economics: Minimum wages increased in 19 states at the start of 2017. Sometimes states raise them as they feel it to be necessary, and others tie the minimum wage to the cost of living.

The new California statewide minimum wage rose to $11 an hour from $10.50 on Jan. 1, 2018, if you have 26 or more employees, and to $10.50 from $10 if you have fewer workers. The state minimum wage will continue to rise each year until it reaches $15 an hour in 2022 if you’re a large employer (2023 for smaller employers).

Many California cities and counties are increasing their minimum wages at faster rates, making things payroll even more complicated. For example, Berkeley, Mountain View and San Francisco will reach $15 an hour in 2018 — but not at the same time. San Diego, meanwhile, won’t have another wage hike until January 2019. Emeryville already has a minimum wage of $15.20 for businesses with 56 or more workers in the city — but that rate will be raised to approximately $15.60 in July, based on the Consumer Price Index. Understanding the federal minimum wage is just the beginning!

At least if you run a restaurant you can pay a lower minimum wage to tipped employees, as long as their overall income meets the standard minimum wage, right? Under federal rules, you may be able to pay a lower minimum wage to waiters, for example. But not in California and several other states, where the minimum wage is the minimum wage, no matter how much employees earn in tips.

In general, if you’re reeling from all this, know that when federal and state laws have differing minimum wage rates, the higher standard applies. And yes, following a patchwork of different rates is mind-boggling. Even determining how to count employees when figuring out whether you have 25 employees or fewer can feel like a minefield. Sometimes, you have to make an educated guess when deciding who is an employee for purposes of the 25-person cutoff. Official California guidance notes that “when there is an ambiguity in law or facts, the courts generally will look for a reasonable interpretation that is most favorable to workers.”

Nor is California unique. Other states have equally confusing rules that make minimum wage calculations difficult.

The bottom line? Wherever you and your employees are located, and whatever kind of company you run, don’t make assumptions about the minimum wage — make sure you get the full state and local details.


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