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.
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