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The Push for $15, and the Impact on Employers


By Richard D. Alaniz A


$15 an hour minimum wage should be mandatory, according to Democratic presidential candidate Bernie Sanders. “Millions of Americans are working for totally inadequate wages,” Sanders states on his website. “We must ensure that no full- time worker lives in poverty. The current federal minimum wage is starvation pay and must become a living wage. We must increase it to $15 an hour over the next several years.”


An increasing number of cities and states are beginning to agree, including California and New York, both of which recently passed $15 an hour minimum wage laws. However, the California Chamber of Commerce called the increase “a job killer.”


As


more politicians and union-affiliated groups push for higher minimum wages, employers need to prepare now for the significant financial, compliance, and regulatory challenges these changes bring.


A Rising Minimum Wage


According to the National Conference of State Legislatures, 29 states and Washington, D.C., have minimum wages above the federal minimum wage of $7.25 per hour. When federal and state law have different minimum wage rates, the higher standard applies. So far, California and New York have


enacted laws that will increase those states’ minimum wages to the highest in the country. In April, California Gov. Jerry Brown signed the bill that increased the state’s hourly minimum wage to $15 by 2022 for companies with more than 25 employees, and by 2023 for smaller businesses. The increase will start in 2017, when the California minimum wage will rise from $10 an hour to $10.50. However, the state can stop


20 ❘ June 2016 ®


the wage increases in the event of a recession or economic downturn. And California isn’t alone. In New


York, lawmakers approved a $15 an hour minimum wage. These new laws will have a broad impact. Last year, 53.6 million workers in the U.S. were paid less than $15 an hour, according to the Wall Street Journal. In New York State alone, the $15 minimum wage will increase the earnings of more than 2.3 million New Yorkers, Cuomo’s office said.


But while some states are raising their minimum wages, others are pushing back. For example, North Carolina recently passed a law that limited the ability of cities and towns to set minimum wages. In February, Alabama lawmakers passed a similar law to ban local governments from establishing local minimum wages. That was in response to a law in Birmingham that would have raised the minimum wage to $10.10 in the city.


What Employers Need to Know Obviously, the biggest repercussions of the rising minimum wage will be financial, as companies struggle to remain competitive and profitable with skyrocketing worker costs. But there are other considerations as well, including regulatory, paperwork, and compliance. Among the things companies need to know: • Understand the Changes


Different states have different timelines for the increase in minimum wage. Even states that aren’t aiming for $15 have made increases. According to the NCSL, Rhode Island raised its minimum wage to $9.60 effective Jan. 1. Washington, D.C., will increase its minimum wage to $11.50 on July 1.


And the minimum wage in Minnesota will increase to $9.50 on Aug. 1 for large employers, and $7.75 for small employers. Employers need to prepare now for actions that have been already legislated, or could be in the works. It’s important to plan ahead, work with HR and legal counsel to understand what changes may be on the horizon, and pro-actively prepare for them.


• Review Employee Classifications


While the minimum wage affects


workers who are nonexempt from the Fair Labor Standards Act, new laws could also impact whether employees are classified as exempt or nonexempt. That could have far-reaching financial and HR considerations. For example in California, in order to be exempt from overtime laws employees must earn a minimum monthly salary that is no less than twice the state minimum wage. That means employers in the Golden State need to be aware of how the minimum wage boost could impact whether employees are exempt or nonexempt. Furthermore, separate and apart from the increase in minimum wage, the Department of Labor is expected to release its Final Rule modifying the “white collar” exemptions.


This rule


will more than double the salary office, executive, and professional employees must be paid in order to be classified as exempt employees. With the increased focus on wages across the country, now is a good time to conduct a thorough review of your employee classifications and other wage and hour policies.


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