What Do Minimum Wage Increases Mean for Workers and Employers?

What Do Minimum Wage Increases Mean for Workers and Employers?

- in Employment & Labor Law
Minimum Wage Increases Mean for Workers and Employers

Pressure to raise the federal minimum wage has been building for years even as several states have put themselves on the path to having a $15 per hour minimum wage by 2025. Whether President Joe Biden and Democratic majorities in the U.S. House and Senate succeed in increasing the federal minimum wage from $7.25 per hour is unclear, but employers and employees across the United States must know what to do if wage increases go into effect.

How Do I Know What the Minimum Wage Is?

The Wage and Hour division of the U.S. Department of Labor maintains the most official list of minimum wage rates for each state and the District of Columbia. The web-based list is updated each year, along with notes on the current situation and planned increases. A federal law called the Fair Labor Standards Act also requires nearly all workplaces to post information about the minimum wage in a conspicuous location where employees can easily see it.

Minimum wage laws vary greatly from state to state, and sometimes from city to city. For instance, a handful of states, including Arizona and Louisiana, do not set their own minimum wage. This means employers must comply with the federal standard.

Most states mandate a higher minimum wage. In Ohio, where we advise and represent clients in wage and hour cases, the basic minimum wage in 2021 is $8.80 per hour. Still other states, notably New York and New Jersey, are consistently raising the minimum hourly wage to a target of $15.

The situation grows more complicated for employees who regularly receive tips and for residents of certain large cities. First, states generally set a tipped wage that is half or just slightly more than half of the general minimum wage. In 2021, the minimum wage for tipped employees in Ohio is $4.40 per hour. Tips that the employee receives must then raise the average hourly earnings  to at least $8.80. When that does not happen, the employer is legally required to pay the difference.

A last consideration is that a small number of cities have used authorities under their state’s law to raise the minimum wage on their own. This most famously happened when Seattle and nearby cities mandated a $15 minimum wage in the early 2010s. The state legislature has since put all localities on track to hit $15 per hour.

What Does a Minimum Wage Hike Mean for Paychecks?

New state and local laws typically take effect on January 1 or July 1, when the state budget cycle starts. Also, higher minimum wages generally go into effect a full year after the new wage law is passed.

In practice, then, employers would need to comply with a new wage law passed in 2021 at the start of January or July 2022 typically. The higher pay would then show up on employees’ next paycheck—January 15 or July 15.

Employers are allowed to reduce hours or cut staff in order to keep their books balanced. Employers also are not legally obligated to increase pay for workers who already earn more than the minimum wage.

How Does the Minimum Wage Affect Overtime Pay?

Every non-exempt hourly employee, including those who earn the minimum wage, qualifies to make at least time-and-a-half after they work 40 hours during a seven-day workweek. This is true for tipped employees, as well.

The overtime clock starts as soon as the employee works over 40 hours in one week.  When an employee receives tips, their overtime rate is calculated as if they earned the regular minimum wage.

Employers are not allowed to force employees to clock out and keep working just so they do not go into overtime. Employers also cannot use the tipped wage as the basis for determining how much overtime pay is due.

What Happens When an Employer Does Not Raise Employees’ Pay as Required by Law?

As Ohio wage and hour attorneys, we have seen employers use these illegal tactics to deny employees the minimum wage and overtime pay:

  • Requiring workers to perform tasks off the clock,
  • Promising leave in lieu of paying time-and-a-half but then never approving time off,
  • Giving hourly workers managerial titles because managers are not typically not entitled to overtime,
  • Claiming that hourly workers are actually salaried employees who are generally exempt from overtime eligibility,
  • Classifying employees as independent contractors who cannot demand either the minimum wage or overtime,
  • Deliberately miscalculating tips, and
  • Telling tipped employees they are not eligible to earn either the minimum wage or overtime pay.

When any of this happens, an employee has the right to file a lawsuit and demand unpaid wages, unpaid overtime, interest on the amounts owed, and monetary damages. Such a lawsuit can be filed by a current employee or by a former employee as long as it is brought within the applicable time period. Additionally, more than one wronged employee can be listed as a plaintiff. An experienced wage and hour attorney will know how to obtain and analyze the company records needed to prove that violations of the minimum wage and overtime laws occurred.

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