The past month was full of minimum wage, tip, and overtime activity: amendments; annual rate adjustments; ballot measure battles; legal challenges; and new bills. It was a September to remember.

DOL’s 20% Tip Rule Upheld: The U.S. Court of Appeals for the Ninth Circuit joined the Eighth Circuit in deferring to the U.S. Department of Labor’s “20% Rule” set forth in its Field Operations Handbook, which interprets the agency’s dual-jobs regulations. The rule limits the amount of time tipped employees may engage in non-tipped tasks unrelated to their tipped duties, and non-incidental tasks related to their tipped duties, and be paid the lower tipped employee minimum cash wage instead of the full minimum wage.1

Michigan Minimum Wage Increase & Tip Credit Phase-Out: The Michigan Legislature adopted as law a proposed ballot measure that contains a series of annual hikes to the state’s minimum wage – ultimately reaching $12.00 per hour in 2022 – and phases out the tip credit afforded to employers of service employees who receive gratuities over the same timeframe. However, it is possible further changes may occur before the first scheduled change (currently estimated to be around April 1, 2019).2

2019 Minimum Wage Announcements: Various states, cities, and counties annually adjust their minimum wage rates, with new rates taking effect on January 1. In September, the following 2019 rate announcements were made.

  • Montana: The state labor department announced the minimum wage will increase from $8.30 to $8.50 per hour. Montana prohibits tip credits, so tipped employees must be paid the full minimum wage.
  • Ohio: The state commerce department announced the minimum wage will increase from $8.30 to $8.55 per hour. For tipped employees, the minimum cash wage will increase from $4.15 to $4.30 per hour, and the maximum tip credit will increase from $4.15 to $4.25 per hour. The gross receipts threshold for coverage under the law will increase from $305,000 to $314,000 per year. Interestingly, the $4.30 minimum cash wage differs, percentage-wise, from previous years. Under Ohio law, covered tipped employees can be paid not less than half the state minimum wage if their direct wage plus tips equals or exceeds the state minimum wage. In previous years, the minimum cash wage was closer to 50% of the minimum wage, e.g., $4.08 in 2017, $3.98 in 2014, and $3.93 in 2013. Per informal discussions with state officials, the figure was rounded to the nearest five cents based on feedback the department received in previous years.
  • South Dakota: The state labor department announced the state minimum wage will increase from $8.85 to $9.10 per hour. For tipped employees, the minimum cash wage and maximum tip credit will increase from $4.425 to $4.55 per hour.
  • San Diego, CA: The city treasurer announced the minimum wage will increase from $11.50 to $12.00 per hour. California law prohibits tip credits, so tipped employees must be paid the full local minimum wage.

A Piece (Rate) of Advice: Answering a certified question from the U.S. Court of Appeals for the Ninth Circuit, the Washington State Supreme Court held that a payment plan that is based on “production minutes” does not qualify as a piecework plan under Washington’s Minimum Wage Act. The court did not rule on the merits of the case, but its answer may influence the litigation’s outcome because, under state law, a regulation states that commission or piecework pay to non-agricultural employees can be averaged during a workweek to determine whether they have earned at least state minimum wage. By contrast, the court stated, under the Washington Minimum Wage Act hourly pay is credited only to the hours during which it is earned.

Ballot-Related Battles: The saga continues concerning whether Issue 5 will appear on the November 2018 ballot in Arkansas. The measure seeks to increase the state minimum wage in 2019, 2020, and 2021. It is being contested at the state supreme court, where challengers have asked the court to disqualify the proposal from being put before voters. Most recently, the court received a report that concluded sufficient valid signatures were collected. Both sides are expected to file briefs asking the court to accept or reject the report’s findings.

The Council of the District of Columbia will need to act soon if it wants to repeal Initiative 77 – a June 2018 voter-approved measure eliminating the tip credit3 – because its changes to D.C. minimum wage and tip credit provisions are projected to take effect on October 9, 2018. A public hearing was held in the middle of September, and the Council’s Committee of the Whole will meet the first week of October to discuss a repeal measure, Bill 22-913, the “Tipped Wage Workers Fairness Amendment Act of 2018.”

Legislative Developments: In September, there was some degree of legislative activity at every level of government.

Four congressional democrats released a report entitled “The Future of Work, Wages, and Labor: Policy & Recommendations,” in which they call for a $15-per-hour federal minimum wage and an increase in the minimum salary or fee pay requirement for exempt white collar employees to almost $47,500. Under both proposals, rates would be adjusted for inflation in future years.4

Maine LD 1913 failed to pass. It sought to further roll back changes approved by voters at the November 2016 election by delaying how fast the state minimum wage rate increases in future years and by eliminating the annual adjustments the law currently contains. Michigan SB 1123 proposes to increase the minimum salary exempt executive, administrative, or professional employees must be paid to at least $913 per week. The current rate – at least $250 per week – is lower than the rate set by the federal Fair Labor Standards Act (FLSA) and is set by regulation. New Jersey AB 4464 was introduced, which would increase the state minimum wage from $8.60 to $9.00 in 2019, with $1.00-per-hour increases occurring in 2020 and subsequent years until the rate reaches $13.00 per hour, after which time the rate would be annually adjusted. In Pennsylvania, the Independent Regulatory Review Commission submitted comments concerning the state’s Department of Labor and Industry’s proposed changes to rules concerning exempt executive, administrative, and professional employees that would increase the exemptions’ salary thresholds and increase them every three years, and change certain elements of the duties tests.5

In Northern California’s San Francisco Bay Area, Sunnyvale will introduce an ordinance to delay the start date from January 1, 2019 to January 1, 2020 for when its local minimum wage is annually adjusted; Alameda is introducing an ordinance to create a local minimum wage; and Menlo Park has put off until 2019 its plans to consider a citywide minimum wage. In response to a rally outside village hall in Arlington Heights, Illinois, the mayor said he would not revisit whether to reverse an earlier decision to opt out of being covered under the Cook County Minimum Wage Ordinance. The City Council in Saint Paul, Minnesota received a report on various approaches it could take to implement a citywide minimum wage.

Reminder – Berkeley Minimum Wage Increase on October 1: As we noted last month, the minimum wage in Berkeley, California will generally increase from $13.75 to $15.00 per hour on October 1, 2018, with the rate applicable to Employer Youth Works & Job Training Participants increasing from $12.00 to $13.25 per hour.