On Thursday, January 24, 2019, the New Jersey Assembly Labor Committee approved a bill (A 15) that, if passed by the legislature, would incrementally raise New Jersey’s minimum wage to $15 per hour for most workers by 2024. If effected, this bill will make New Jersey the fourth state in the nation to commit to a gradual minimum wage hike to $15, joining Massachusetts, California, and New York. While the bill still requires approval by both houses of the state legislature and signature by Governor Murphy, prospect of passage is high in light of Democratic control of both houses and the Governor’s stated support of the initiative.
The bill sets forth the following schedule for the gradual minimum wage increase: $10.00 per hour on July 1, 2019; $11 per hour on January 1, 2020; $12 per hour on January 1, 2021; $13 per hour on January 1, 2022; $14 per hour on January 1, 2023; and $15 per hour on January 1, 2024. Wages would then continue to increase in accordance with the consumer price index for all urban wage earners and clerical workers (CPI-W), as calculated by the federal government.
Several exceptions have been negotiated into the current version of the proposed bill:
- Seasonal workers and employees of small businesses (i.e., employers with five or fewer workers) would benefit from the planned increase at a slower rate, with a plan to reach $15 per hour by 2026.
- Agricultural workers are scheduled to realize an increase to $12.50 by 2024, at which point a special committee would determine whether to further increase their base minimum wage to $15 per hour by 2027.
- Tipped employees would continue to receive at least the regular minimum wage through a combination of base salary and tips, although their base salary is scheduled to rise from the current minimum of $2.13 per hour to $5.13 per hour by 2024.
- Beginning on January 1, 2020, employers could pay new hires enrolled in an established employer training program a “training wage” (of not less than 90% of the regular minimum wage) for their first 120 hours of work, provided that the new hire has no previous similar or related experience. The Commissioner of Labor and Workforce Development would define the parameters of what constitutes such a “training program.”
In summary, the proposed bill would increase wages as follows:
The bill also proposes tax credits for businesses that hire employees “whose work capacity is significantly impaired by age or physical or mental deficiency or injury,” with the purpose of helping to “offset the cost to the employer of any wage increases for those employees caused by” the enactment of the bill.
These significant increases in the New Jersey minimum wage would not only affect the wages of employees currently paid at minimum wage, but should also be expected to have a ripple effect on the wages of supervisory and non-exempt employees with hourly rates above the minimum wage. Employers should begin to examine their pay practices for non-exempt employees to determine who may be affected by the wage increase, and consider what changes, if any, to business practices (including potential staffing or scheduling reductions) may be appropriate to absorb this increased labor cost.The bill also proposes tax credits for businesses that hire employees “whose work capacity is significantly impaired by age or physical or mental deficiency or injury,” with the purpose of helping to “offset the cost to the employer of any wage increases for those employees caused by” the enactment of the bill.
Employers should keep in close contact with employment counsel as the legislative vote, and any subsequent implementation date, approaches.