Last week, Minneapolis’ city council passed a minimum wage bill, raising the minimum wage to $15 for nearly all employees through a phase-in process, which will be complete in 2022 for large businesses and 2024 for small businesses. The law defines large businesses as those who employ more than 100 employees, and small businesses as those who employ 100 or fewer employees. Special rules apply to determining business size for franchise establishments and full-service restaurants. The large versus small business definitions under the ordinance differ from the large versus small employer definitions under Minnesota state minimum wage law, which tie employer size to annual gross volume of sales.

The city council’s findings indicate that the minimum wage ordinance will raise wages of at least 23 percent of the city’s workers, who currently make under $15 per hour. The law applies to all employers in the city of Minneapolis (and potentially outside the city of Minneapolis), but excludes the U.S. government, the state of Minnesota, and any county or local government, other than the city of Minneapolis.

Phase-in Schedule

The first wage increases will go into effect on January 1, 2018, for large businesses, who will have to raise their minimum wage to $10 per hour. On July 1, 2018, the minimum wage will increase to $11.25 per hour for large businesses, and $10.25 per hour for small businesses. Further wage increases will be as follows:

Click here to view table.

1Note that the City of Minneapolis' description of the ordinance on its website is inconsistent with the text of the ordinance. We recommend following the provisions of this chart, which tracks the actual language of the ordinance, as opposed to the city's chart.

After the $15 phase-in is complete (July 1, 2022 for large employers and July 1, 2024 for small employers), the minimum wage is scheduled to increase based on the inflation-indexing provisions of Minnesota’s state minimum wage law, found in Minnesota Statutes § 177.24(f), with increases to be announced by September 1 of each year, to be effective on January 1 of each subsequent year.

The Minimum Wage Ordinance does not include any provision for a tip credit, or allow any gratuities to be counted toward the minimum wage.

Exceptions to Minimum Wage Law

A training wage of not less than 85 percent of the otherwise applicable minimum wage may be paid during the first 90 days of employment in any calendar year, to an employee under the age of 20, who is employed in a city-approved training or apprenticeship program. Criteria for such a training or apprenticeship program have not yet been set. As written, it appears that such a training wage could be paid in the first 90 days of employment in subsequent calendar years, but it is not clear whether this was intended or whether the law will be revised or the criteria for a training program will preclude such application.

The law does not apply to "extended employment program workers," as defined by state law, or to bona fide independent contractors.

Unanswered Questions

The law purports to apply to employees who work in the city on at least "an occasional basis," provided that the employee performs at least two hours of work within the city of Minneapolis in a given week. This provision will likely fuel challenges by business groups, who partially succeeded in enjoining Minneapolis’ paid sick leave law, to the extent it applied to businesses without a physical presence in the city of Minneapolis.

The law contains a definition for "micro business," which is defined as an employer that employs 20 or fewer employees. However, while the inclusion of this term raises questions about the law’s applicability to such businesses, the term is not used in the substantive provisions of the ordinance.