On August 18, 2015, the Birmingham City Council passed “An ordinance relating to minimum wage to be paid to Employees by Employers in the city of Birmingham Alabama”.  The Ordinance cites poverty in Birmingham as a problem that “affects the general health and welfare of all its citizens,” that at least 15 other cities have passed similar laws, and that “a minimum wage increase would reduce labor turnover, improve organizational efficiency, increase worker purchasing power in our local economy, and reduce reliance on social services”.  The Ordinance has specific definitions for the following:

  1. “'Employ' means to suffer or permit to work.”
  2. “'Employer' means any individual, partnership, association, corporation, business trust, or any other person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee…”
  3. “'Employee' means any individual employed by an Employer and who performs at least twenty hours of work within a calendar year while physically present within the geographic boundaries of the city of Birmingham for an Employer.”
  4. “'Wage' means any fixed regular payment made on a regular basis, typically on an hourly , daily or weekly basis, made by an employer to an employee for work or services.”
  5. “'Minimum wage' includes all Wages, Commissions, Piece-Rate, and Bonuses received by the employee and shall be governed by the rates set forth in Section II(B)(ii) of this ordinance.”

Effective July 1, 2016, the minimum wage shall be $8.50 an hour.

Effective July 1, 2017, the minimum wage shall be $10.10 per hour.

Effective July 1, 2018, and each July 1 thereafter, the “minimum wage rate from the previous year shall be increased by the increase, if any, in the cost of living.”

Employers may consider tips as part of the wages of tipped employees, but such a tip credit may not exceed 50% of the minimum wage rate.  “An employer who elects to use the tip credit must inform the affected employee in advance and must be able to show that the employee receives at least the minimum wage rate specified pursuant to this Ordinance when direct wages and tips are combined.  The tips received by an Employee become the property of the Employee and may not be shared with the Employer, except that this provision does not preclude a valid tip pooling or sharing arrangement among employees who customarily and regularly receive tips.”

Employers who do not pay the minimum wage “shall be required to pay the employees the unpaid wages together with an additional two times that amount as liquidated damages.”  Employees can bring suit for the full amount of wages owed, liquidated damages, reinstatement if fired, actual damages, civil penalties, reasonable attorneys’ fees and costs.

Employers who violate this ordinance are also subject to a civil penalty not to exceed $100 a day, per Employee who fails to receive minimum wages.  The City can issue citations to Employers, and if the citation is not paid within 15 days, the city SHALL initiate a civil action to collect the penalty.  If found to have violated the ordinance, the Employer may be required to reimburse the City for any costs associated with the investigation of and enforcement of the Ordinance.

The Ordinance prohibits discrimination or adverse action against any person “in retaliation for exercising rights protected under this Chapter.”  Any Employer who takes adverse action “within 90 days of the person’s exercise of rights protected under this Chapter shall raise a rebuttable presumption of having done so in retaliation for the exercise of such rights.”

The City also can revoke or suspend any registration, certificates, permits or licenses held or requested by the Employer should the Employer be found to have violated the Ordinance by any judicial or administrative proceeding and not cured by compliance with the order/decision of the governmental agency determining the issue.

Practice pointers.  This new Ordinance has the potential to change the way many Employers do business in Birmingham.  These changes may include:

  1. The cost of doing business will go up as the result of the increased minimum wage in excess of the federally mandated $7.25 per hour.  Will Employers re-locate out of Birmingham?  Will Employers who are located outside of Birmingham, but send Employees into the city, stop doing business inside the city limits?  How will they account for hours spent in and outside of Birmingham, and will they pay their employees different rates?  Will there be an increase in wages for those who are currently making more than the minimum wage, as those Employees below them get an increase?
  2. With all the attention on misclassification of employees by federal and state agencies, will the increase in minimum wage cause more Employers to consider using independent contractors instead of employees?  If so, will this subject them to claims of misclassification?  For Businesses that are already using independent contractors, will the new law result in the workers making claims that they should be classified as Employees, thus resulting in potential exposure of wages, 2X liquidated damages, civil penalties and attorneys' fees?
  3. For those Employers who have Employees compensated in part by tips, a great deal of oversight will be required to insure compliance with the Ordinance.
  4. Will Employers re-evaluate any bonuses available to Employees in light of the Ordinance?

Employers who conduct business in Birmingham beware:  non-compliance with the new Minimum Wage Ordinance can be very expensive, both monetarily and the potential of losing your business licenses/permits.  Now is the time to begin planning for the changes that will take place on January 1, 2016.  It is only 4 months away!