If January's minimum wage, tip, and overtime developments forecast what employers should expect throughout the remainder of the year, it could be a challenging 2020.
U.S. DOL Passes the Joint (Employer Rule): On January 16, 2020, the U.S. Department of Labor (DOL) released its long-awaited final rule regarding joint-employer status under the federal Fair Labor Standards Act (FLSA), which will become effective March 16, 2020. The rule creates a four-factor balancing test that examines whether the putative joint employer: 1) Hires or fires the employee; 2) Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree; 3) Determines the employee’s rate and method of payment; and 4) Maintains the employee’s employment records.
DOL, an Agency of Letters: The U.S. Department of Labor continues its opinion letter writing streak. One new opinion letter addresses calculating overtime pay for a non-discretionary lump sum bonus an employer pays at the end of a multi-week training period. Another opinion letter addresses whether per-project payments satisfy the salary basis test for the executive, administrative, and professional exemptions. While the FLSA overtime letter provides a straightforward answer, employers might temper the broad sweep of the FLSA salary basis letter with a caveat or two.
Proposed FLSA Flexibility: HR 5656, the Working Families Flexibility Act of 2020, proposes to allow private employers to offer employees compensatory time off at a rate no less than one-and-a-half hours for each hour of employment in lieu of overtime under the FLSA via a collective bargaining agreement or voluntary private agreement with an individual employee. Under the bill, employees cannot accrue more than 160 compensatory time hours, and employers could cash out compensatory time hours that exceed 80 with sufficient notice.
Coast-to-Coast Coverage of State Legislative & Regulatory Developments: After reading about everything that happened in January, and what January developments may signal for the rest of 2020, some employers may toast to "dry January" ending.
Colorado's Department of Labor and Employment finalized Colorado Overtime and Minimum Pay Standards (COMPS) Order #36, which significantly broadens coverage under, and revises, wage and hour rules, beginning March 16, 2020. Previously, four industries were subject to the rules: 1) Retail and service; 2) Commercial support service; 3) Food and beverage; and 4) Health and medical. As amended, the order applies to all industries unless an exemption applies.
Among the more notable changes are pay standards for exempt executive, administrative, and professional employees (including computer employees). From March 16 through June 30, 2020, employers must pay executive, administrative, and professional employees a salary that is at least the minimum wage for all hours in a workweek. In addition to this general rule for salaries, beginning July 1, 2020, the following minimum salary amounts apply (which can exceed the FLSA rate in 2020, and will exceed it in future years):
The order allows exempt computer employees to be on a salary or hourly basis. For hourly computer employees, the rate must be at least $27.63 per hour. In 2021 and each subsequent year, the state will adjust the rate based on consumer price index changes. Additionally, the revised rule contains duties requirements that mirror, but are not identical to, FLSA standards, e.g., employees must have the type of advanced knowledge customarily acquired by a prolonged course of specialized formal or informal study, and must spend at least 50% of a workweek performing exempt duties.Beginning January 1, 2025, and each subsequent January, the state will adjust the salary amount floor based on consumer price index changes.
The above changes represent a small percentage of revisions the state labor department makes. We recommend employers with Colorado operations consult employment counsel about the above (and other) amendments to ensure their policies and procedures will comply when the changes take effect in a month and a half.
Connecticut Governor Ned Lamont (D) signed HB 7501, which requires the state labor department, by April 1, 2020, to propose new rules concerning tip-credit employees who perform both service and nonservice duties. Notably, the bill requires the rules to align with the 20% rule concerning tip-credit employees performing non-tipped duties that the U.S. Department of Labor plans to eliminate. The bill also requires the department, no later than 30 days after finalizing the rules, to conduct random wage and hour audits of tipped workers in no fewer than 75 restaurants and prepare a report on their compliance with the new rule. Additionally, within one year of the final rule, the department must report to the state legislature.
In New York, the state labor department proposes changes to the Wage Order for Miscellaneous Industries and Occupations that will affect how covered employers pay tipped employees (i.e., employers and employees not covered by the Hospitality Wage Order). Currently, if an employee’s weekly tip average is less than the Low (L) amount, employers cannot claim a tip credit. If an employee’s weekly tip average is between the Low (L) and High (H) amounts, the tip credit cannot exceed the Low (L) amount. If an employee’s weekly tip average equals or exceeds the High (H) amount, the tip credit cannot exceed the High (H) amount. However, NYSDOL proposes to cut in half the tip credit amount on June 30, 2020, and eliminate the tip credit altogether on December 31, 2020. If adopted, the minimum wage (MW), tip credit (TC), and minimum cash wage (MCW) would be as follows:
NYSDOL published the proposal on January 22, 2020, and will accept public comments for 60 days.
Also, a late addition. On December 23, 2019, the New Jersey Department of Labor and Workforce Development published proposed revisions to its wage and hour rules in response to 2019 minimum wage amendments. Among the proposed changes is a proposal to adopt a 20% rule concerning tip credit employees performing non-tipped duties. As noted above, this is the standard the U.S. Department of Labor proposes eliminating. A good chunk of the proposed rules concerns tipped employees. The Department will hold a public hearing on February 26; the public comment deadline is April 3, 2020.
Because Pennsylvania legislators did not agree on an increase to the minimum wage, tipped and exempt employee pay levels before the deadline the governor set, the state labor department's proposed salary increases for exempt executive, administrative, and professional employees were back before, and approved by, the Pennsylvania Independent Regulatory Review Commission on January 31, 2020. Under the proposal, the salary threshold will increase to $684 per week / $35,568 annually when the rules take effect (i.e., the FLSA rate), $780 per week / $40,560 annually on January 1, 2021, and $875 per week / $45,500 annually on January 1, 2022. In 2023 and every subsequent three years, the rate will be an amount equal to the 10th percentile of all Pennsylvania workers who work in such exempt jobs. Additionally, the proposal includes changes to required duties these employees must perform. Notwithstanding that legislators did not reach a compromise by the governor's deadline, they may be able to impede the rule change's eventual effective date via the legislative process. Alternatively, if legislators can achieve compromise, the governor could direct the department to rescind the rules.
Other State Legislative Updates: A joint committee of both legislative houses is reviewing Vermont SB 23, which proposes to increase the minimum wage from $10.96 to $11.75 and $12.55 per hour on January 1, 2021 and 2022, respectively (and then revert to annual consumer price index adjustments in 2023). Additionally, the bill mandates a written report on altering or eliminating the tip credit for tipped employees and the subminimum wage for secondary school students.
In January, two bills passed at least one house. New Hampshire HB 731 proposes to increase the state minimum wage from $8.50 per hour, on January 1, as follows: $10.60 (2021); $11.70 (2022); $12.80 (2023); $13.90 (2024); and $15.00 (2025). Additionally, the bill proposes to increase the minimum cash wage for tipped employees from 45 to 50% of the minimum wage, and beginning January 1, 2026, that rate will change due to consumer price index changes. Virginia HB 56 seeks to prohibit employers from classifying an individual as a tipped employee if federal or state law prohibits the individual from soliciting tips.
New Hampshire SB 410 passed out of committee. It proposes to increase the minimum wage from $8.50 to $10.00 and $12.00 per hour on January 1, 2021 and 2023, respectively. It also proposes a minimum cash wage for tipped employees of $4.00 per hour, and $7.25 per hour for licensed secondary games operators.
Common at the beginning of each legislative session is a tidal wave of minimum wage, tip, and/or overtime bills. Because this month we are raining down content on our readers, we briefly summarize new bills.
- Minimum Wage: Hawaii SB 2466 seeks to gradually increase the minimum wage from $10.10 to $15.00 per hour by 2024. Similarly, Indiana SB 176 seeks to increase the minimum wage from $7.25 to $15.00 per hour by July 1, 2023, with annual adjustments in future years. Iowa SB 2075 seeks to increase the minimum wage from $7.25 to $9.30 per hour on July 1, 2020, followed by annual adjustments. Kentucky HB 39 and SB 13 seek to increase the minimum wage from $7.25 to $15.00 per hour by July 1, 2027. Rhode Island SB 7157 would incrementally increase the minimum wage from $10.50 to $15.00 per hour by July 1, 2024, whereas the minimum wage would hit $15.00 per by July 1, 2025 under SB 2143, which also proposes annual adjustments beginning January 2026. Under various Virginia proposals, the minimum wage would gradually increase from $7.25 to $15.00 per hour: by January 1, 2024 (HB 433); by July 1, 2024 (HB 395); and by July 1, 2025 (SB 816). Moreover, under HB 433 and HB 395, the state would annually adjust the rate after it hits $15.00. However, under HB 615, the minimum wage would increase to $10.10 per hour in 2021; in 2022, and then every two years, the state would adjust the rate. West Virginia HB 2463 would require the state to annually adjust the currently $8.75 per hour minimum wage, whereas HB 2871 would increase the rate 75 cents per hour each year until it reaches $12.00 on January 1, 2023, and HB 4068 would gradually increase the rate until it hits $15.00 per hour on January 1, 2025.
- Legislators in the following states propose to implement a minimum wage requirement where none currently exists: Mississippi SB 2047; Tennessee HB 1788.
- Overtime: Washington SB 6516 would lower the overtime threshold from 40 hours to 32 hours.
- Legislators in the following states propose to implement an overtime requirement where none currently exists: Mississippi SB 2047; Tennessee HB 1788; Virginia HB 1535.
- Exempt Pay Requirements: SB 1436 in Florida, which generally does not have an overtime requirement, proposes to require employers, beginning July 1, 2020, to pay overtime to salaried employees who make less than $51,064 per year (this number adjusts in 2024 and every subsequent three years). Vermont S. 299 proposes to require employers to pay executive, administrative, and professional employees at least $913 per week to be exempt.
- Minimum Cash Wage for Tipped Employees: Kentucky HB 39 and SB 13 seek to increase the minimum cash wage from $2.13 to, on July 1: $3.05 (2021); $3.95 (2022); and $4.90 (2023). Nebraska LB 915 seeks to increase the minimum cash wage from $2.13 per hour to $3.60 in 2021, and $4.50 in 2022 and subsequent years. Virginia HB 395 proposes to increase incrementally the minimum cash wage from $2.13 to 70% of the minimum wage beginning July 1, 2025.
- Virginia HB 550 proposes that, if a tipped employee regularly performs services in the course of employment for which there is no reasonable expectation the employee will receive tips, employers must pay the employee the full minimum wage.
- Tip Credits: New Jersey AB 289, the Tipped Wage Worker Protection Act, would ban tip credits. Rhode Island SB 2143 proposes to reduce gradually the tip credit, and then eliminate it by January 2029.
- Service Charges: Hawaii HB 1605 and SB 2230 seek to prohibit hotels and restaurants from using a food or beverage service charge to pay for costs or expenses other than employees' wages and tips.
- Tip Pooling: New York A 266 would permit tip pooling with back-of-house employees of restaurant and hospitality businesses if employers pay these employees the full minimum wage.
- Preemption: West Virginia SB 48 and SB 227 propose to prohibit local minimum wage ordinances (and local regulation more broadly).
- Anti-Preemption: Florida SB 2020 and Idaho HB 337 propose to repeal state laws preempting local minimum wage ordinances. Kentucky HB 39 and SB 13 propose to allow local minimum wage ordinances. New York A 5541 would allow localities to set higher wage and hour standards. Virginia HB 325 would permit local minimum wage ordinances.
Ballot Boxing: The Ohio Attorney General certified for the November election the Raise the Wage Ohio Amendment. The measure proposes to amend the state constitution to increase the minimum wage from to $9.60 per hour on January 1, 2021, annually increase the rate in equal amounts (i.e., 85 cents per hour) per year until it reaches $13.00 per hour on January 1, 2025, and then annually adjust the rate based on consumer price index changes.
Local Matters: In Flagstaff, Arizona, the city council discussed a forthcoming survey concerning its minimum wage ordinance. Separately, residents reported receiving calls asking their thoughts about the ordinance, which did not appear to be the city-sanctioned survey.
In Northern California's San Francisco Bay Area, the San Carlos City Council continued its hearing concerning a proposed minimum wage ordinance because it did not receive a requested opinion before the meeting. However, the Half Moon Bay City Council did hold a hearing on its proposal, amending the measure to delay the first day the $15.00 per minimum wage could apply from July 1, 2020 to January 1, 2021, and will hold a second reading the first week of February.
Ending years of litigation, the Minnesota Supreme Court held state law did not preempt the Minneapolis Minimum Wage Ordinance. In a footnote, the court noted the challengers also previously unsuccessfully argued that the ordinance should not apply to employers located outside Minneapolis that send workers into the city, but did not appeal the lower court's ruling. Accordingly, the law is valid and applies to Minneapolis and non-Minneapolis employers with covered employees performing work in the city. In the other twin city, Saint Paul released rules and FAQ implementing its minimum wage ordinance, which took effect on January 1, 2020. The rules clarify numerous issues, including specific records employers must keep and factors the enforcement agency will consider to determine whether a worker is an employee or an independent contractor.
In Santa Fe, New Mexico, the city announced its minimum wage will increase from $11.80 to $12.10 per hour on March 1, 2020. For tipped employees, the ordinance does not set a minimum cash wage or maximum tip credit. However, state law, as of January 1, 2020, establishes a $2.35 per hour tip rate, which results in a $9.75 per hour tip credit through December 31, 2020, and a $9.55 per hour tip credit when the state minimum cash wage increases to $2.55 per hour on January 1, 2021 until the city again adjusts its minimum wage.
A bill in New York City, New York proposes to require tip disclosures for delivery workers when customers make purchases online or through third-party sites and apps. For example, the third-party service must disclose its policies, and the policies of the goods-providing entity, regarding delivery worker tips. Specifically, the third-party service must disclose:1) The proportion or fixed amount of each tip distributed to the delivery worker, including whether the tip must be shared with other workers; 2) When and in what form of payment tips are distributed to delivery workers; and 3) The amount of each tip that is used to compose each delivery worker’s base wage.
In Philadelphia, Pennsylvania, City Council Files 200042 & 200008 propose to create a local labor department to investigate and enforce the city's worker-protection laws, and a board to review its determinations, and File 200049 proposes to allow the Committee on Labor and Civil Service to hold hearings on workplace misclassification.
A memo by the deputy city manager of Bainbridge Island, Washington includes a list of potential future topics the city council could address, which includes a $15.00 per hour minimum wage.
Airport Delays and Preparations for Takeoff. In Florida, the Orlando International Airport board voted to delay implementing a $15.00 per hour minimum wage for airport workers, whereas in Minnesota, the Metropolitan Airports Commission held a hearing to raise the minimum wage to $15.00 an hour for employees at Minneapolis-St. Paul International Airport.
Yes, This Article Has Been Taxing. Sorry, we cannot offer you anything for reading this far, other than information about states offering minimum-wage-related tax relief. A press release by New Jersey Governor Phil Murphy (D) reminds New Jersey employers about a $10 million tax credit program for the 2019 tax year to help offset payroll cost increases for employers of workers with impairments, who can claim credit for the cost of the minimum wage increase and corresponding payroll tax increase. Similarly, a press release from the Illinois Department of Revenue reminds small businesses that, starting January 1, 2020, they can use the minimum wage credit to offset state minimum wage increases.