On March 23, 2016, the U.S. Virgin Islands joined the growing list of states, municipalities, and territories that have adjusted their minimum wage above the federal minimum wage, which has been set at $7.25 per hour since 2009. The minimum wage will increase to $8.35 per hour beginning 90 days following the effective date of the Act (or June 21, 2016). The Virgin Islands minimum wage will increase to $9.50 per hour on June 1, 2017, and $10.50 an hour on June 1, 2018. After December 31, 2018, the minimum wage for individuals who are not employed in the tourist service or restaurant industry will be reviewed by the Virgin Islands Wage Board, which will determine a minimum wage in accordance with statutory criteria.

The new legislation provides that tourist service and restaurant employees who are tipped employees must be paid not less than 40 percent of the new minimum wage, which will require a minimum cash wage of $3.34 for tipped employees in those industries (whereas current federal law only requires a minimum cash wage of $2.13 for those employees). After 2020, the Wage Board may adjust the minimum wage for tourist service and restaurant employees who are tipped employees to a rate not greater than 45 percent of the territory’s minimum wage or less than the federal minimum wage for tipped employees.

Although the Wage Board previously was authorized to prescribe a maximum workweek of 48 hours before overtime rates were to be paid to employees in the tourist service or restaurant industry, the new law imposes overtime rates after 40 hours. This change harmonizes the law describing the duties of the Wage Board with the existing Virgin Islands overtime law which, in pertinent part, requires overtime to be paid to employees in the tourist service or restaurant industry who work in excess of 40 hours in a workweek. 

Under the amended law, employees of businesses that have gross receipts of less than $150,000 per year and employees who are under the age of 18 years or who are full-time high school students are no longer exempt from the territory’s minimum wage law.

The passage of this legislation means that employers must immediately review their existing wage schedules and prepare to effectuate adjustments to the wages of any employees who are earning the minimum wage. As these changes will take effect in June of this year, when many businesses experience a decrease in revenues due to seasonal variations in the number of visitors to the territory, immediate planning will be crucial.