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While the federal minimum wage remains unchanged, a number of states and cities will be hiking local wage rates on Jan. 1. Other state and local increases are slated for later in the year. As minimum wage requirements continue to change, employers will have to adjust their payroll systems, overtime pay rates and, in some cases, employee exemptions from overtime requirements to ensure compliance with the laws in each of the locations where they operate.
Fewer than half the states had minimum wage rates exceeding the federal floor of $7.25 in 2014. For the first time in 2015, a majority of states had higher rates than the federal minimum as new laws or indexed increases in existing laws took effect.
While 29 states and the District of Columbia already have general minimum wage rates above the federal minimum, some of those have scheduled 2016 rate increases, as shown below. The minimum wage in more than a dozen other states—such as Arizona, Colorado, Florida, New Jersey, Ohio, Oregon and Washington—is indexed for inflation and will automatically adjust annually for increases in the cost of living.
2015 Minimum Wage
2016 Minimum Wage (as of 1-1-16)
Other Scheduled 2016 Increase and Effective Dates
(as of 12-31-15)
(as of 12-31-15)
Note: Many of the states that have increased the general minimum wage have also raised the minimum wage for tipped employees.
Minimum wage changes affect nonexempt employees, but may also impact overtime-exempt employees. Under the Fair Labor Standards Act (FLSA), an individual may qualify for one of the so-called “white-collar exemptions” from federal minimum wage and overtime requirements if he or she is paid a salary of at least $455 per week and satisfies certain other requirements.
While most states apply FLSA standards to determine overtime eligibility, some states base the minimum salary thresholds for exempt\nonexempt status on the state minimum wage. Employers that operate in those locations should ensure that increases in state or local minimum wage rates do not impact the classification of their employees.
In addition to state minimum wage hikes, a number of major cities and counties will be increasing their wage rates in 2016. As indicated below, some of those localities will increase rates on Jan. 1, while others have announced raises for later next year.
Municipality or County
2016 Minimum Wage(as of 1-1-16)
2016 Increases and
$12.25 to $14.44 based on employer size
$13.00 to $14.82 based on employer size (7-1-16)
Los Angeles, CA
$10.50 for employers with 26 or more employees (7-1-16)
Mountain View, CA
Palo Alto, CA
San Francisco, CA
Santa Clara, CA
Johnson County, IA
Jefferson County, KY
Lexington, KY and Louisville, KY
Montgomery County, MD and Prince George’s County, MD
$10.00 (fewer than 500 employees) or $11.00 (500 or more)
$10.50, $12.00, $12.50 or $13.00, based on employer size and contributions toward medical benefits
While efforts to increase the federal minimum wage have stalled in Congress, organized labor and other groups continue to call for a $15 minimum wage nationwide. Many state and local governments have already adopted minimum wage rates above the federal minimum, with further increases to be phased in. As that occurs, employers will need to monitor their pay practices in each of their locations to ensure compliance with federal, state and local wage and hour laws. Finally, employers should make sure to post updated minimum wage posters, as required, when new rates take effect.
Nancy Vary, JD, is director of the Knowledge Resource Center for Buck Consultants at Xerox, where Abe Dubin, JD, is a consultant. This article originally appeared in the Dec. 9, 2015, issue of For Your Information, produced by Buck Consultants’ Knowledge Resource Center. This publication is for information only and does not constitute legal advice; consult with legal, tax and other advisors before applying this information to your specific situation. © 2015 Xerox Corp. and Buck Consultants. All rights reserved. Republished with permission.
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