The Rising Minimum Wages and Tip Credits for 2017

By Benjamin A. Anchill and Margaret Carroll Alli © Ogletree Deakins Jan 3, 2017

Effective Jan. 1, 29 states plus the District of Columbia have minimum wage rates that are above the federal minimum wage rate of $7.25 per hour.

The District of Columbia will continue to have, as it did last year, one of the highest minimum wage rates in the country at $11.50 per hour until July 1 and $12.50 per hour after that date.

With respect to state minimum wages, Massachusetts and Washington will have the highest minimum wages at $11.00 per hour effective Jan. 1 with California close behind at $10.50 per hour (for employers with 26 or more employees), effective Jan.1, and Connecticut following at $10.10 per hour, effective Jan. 1.

The states with the lowest minimum wages continue to be Georgia and Wyoming, both of which have rates of $5.15 per hour, along with Oklahoma, which allows employers that have fewer than 10 full-time employees and $100,000 or less in gross annual sales to pay $2.00 per hour to employees. Five states—Alabama, Louisiana, Mississippi, South Carolina, and Tennessee—have not enacted minimum wage laws. Of the 45 states plus the District of Columbia that have enacted minimum wage laws, 22 (or slightly less than one-half of them) will increase their minimum wage rates from 2016 to 2017 (up from 17 states—or just over one-third—that increased their minimum wage rates from 2015 to 2016).

The 2017 Minimum Wage

The chart below lists the minimum wage rates that will be in effect for 2017 in all 50 states and the District of Columbia and also reflects changes in state laws from 2016 to 2017.

Importantly, all employers covered under the Fair Labor Standards Act (FLSA) will still be required to meet the applicable FLSA minimum hourly rate, which remains at $7.25 per hour, even if a particular state's law allows for a lower minimum wage rate. Thus, states with minimum wage rates that are lower than $7.25 per hour must pay employees at least $7.25 per hour.

The 2017 Maximum Tip Credit

The chart also breaks down the maximum tip credit that employers can count against the hourly rates of tipped employees. The tip credit is the portion of the cash minimum wage that employers are not required to pay to employees who receive tips. The minimum wage less the applicable tip credit is the lowest wage per hour that an employer must pay its tipped employees.

All FLSA-covered employers may apply a tip credit that, generally, should be no greater than the FLSA's maximum tip credit, which is currently set at $5.12 per hour. Employers in states with maximum tip credits that are higher than the federal maximum tip credit may be able to apply the higher tip credit only if the difference between the state minimum wage and the tip credit is at least $2.13.

A more conservative approach, however, would be to adopt the lower federal maximum tip credit since it is more advantageous to employees. Employers in states that have enacted a tip credit that is lower than the federal maximum tip credit of $5.12 per hour (including states that have prohibited the payment of tip credits in their entirety) may continue to follow the more employee-friendly state law.


JURISDICTION

2017 MINIMUM WAGE

2017 MAXIMUM TIP CREDIT ALLOWED

CHANGE FROM 2016

Federal

$7.25

$5.12

No change

Alabama

No specific minimum wage rate under state law; the $7.25 federal minimum wage rate applies

No specific tip credit minimum under state law; the federal $5.12 maximum tip credit applies

No change

Alaska

$9.80, effective January 1, 2017

$0.00; no tip credit allowed under state law

Increase

Arizona

$10.00, effective January 1, 2017

$3.00

Increase

Arkansas

$8.50, effective January 1, 2017

Employers should apply the maximum $5.12 federal tip credit, even though the state maximum tip credit is higher at $5.87.

Increase

California

$10.00 for employers with fewer than 26 employees, effective January 1, 2017

$0.00; no tip credit allowed under state law

Increase for employees who work for employers with 26 or more employees

$10.50 for employers with 26 or more employees, effective January 1, 2017

Colorado

$9.30, effective January 1, 2017

$3.02

Increase

Connecticut

$10.10, effective January  1, 2017

$3.72 (waitpersons); $1.87 (bartenders), effective January 1, 2017

Increase

Delaware

$8.25

Employers should apply the maximum $5.12 federal tip credit, even though the state maximum tip credit is higher at $6.02.

No change

District of Columbia

$11.50 until July 1, 2017, then $12.50

Employers should apply the maximum $5.12 federal tip credit, even though the state-imposed maximum tip credit is higher at $8.73 until July 1, 2017, and will then be $9.17.

Increase

Florida

$8.10, effective January 1, 2017

$3.02

Increase

Georgia

The $7.25 federal minimum wage rate applies because the state minimum wage rate is lower at $5.15 for employers with six or more employees and annual sales of more than $40,000.

Tipped employees are not subject to the state minimum wage rate.

No change

Hawaii

$9.25, effective January 1, 2017

$0.75

Increase

Idaho

$7.25

$3.90

No change

Illinois

$8.25

$3.30

No change

Indiana

$7.25

$5.12

No change

Iowa

$7.25

$2.90

No change

Kansas

$7.25

$5.12

No change

Kentucky

$7.25

$5.12

No change

Louisiana

No specific minimum wage rate under state law; the $7.25 federal minimum wage rate applies

No specific tip credit minimum under state law; the federal $5.12 maximum tip credit applies

No change

Maine

$9.00, effective January 1, 2017

$4.00, effective January 1, 2017

Increase

Maryland

$8.75 until July 1, 2017, then $9.25

$5.12 until July 1, 2017, then $5.62, at which time employers should apply the maximum $5.12 federal tip credit, even though the state-imposed maximum tip credit effective after July 1, 2017 is higher

Increase

Massachusetts

$11.00, effective January 1, 2017

Employers should apply the maximum $5.12 federal tip credit, even though the state-imposed maximum tip credit is higher at $7.75, effective January 1, 2017.

Increase

Michigan

$8.90, effective January 1, 2017

Employers should apply the maximum $5.12 federal tip credit, even though the state-imposed maximum tip credit is higher at $5.52, effective January 1, 2017.

Increase

Minnesota

 

$9.50 for employers with gross sales of $500,000 or more

$0.00; no tip credit allowed under state law

No change

 

$7.75 for employers with gross sales less than $500,000

Mississippi

No specific minimum wage rate under state law; the $7.25 federal minimum wage rate applies

No specific tip credit minimum under state law; the federal $5.12 maximum tip credit applies

No change

Missouri

$7.70, effective January 1, 2017

$3.85

Increase

Montana

$8.15, if the employer's annual sales are more than $110,000, effective January 1, 2017; otherwise the $7.25 federal minimum wage rate applies because the state minimum wage rate for other businesses is lower at $4.00 

$0.00; no tip credit  allowed under state law

Increase

Nebraska

$9.00

Employers should apply the maximum $5.12 federal tip credit, even though the state-imposed maximum tip credit is higher at $6.87.

No change

Nevada

 

$7.25 if the employee receives health benefits provided by the employer

$0.00; no tip credit allowed under state law

 

No change

 

$8.25 if the employee does not receive health benefits provided by the employer

New Hampshire

$7.25

$3.99

No change

New Jersey

$8.44, effective January 1, 2017

Total wages and tips must equal at least the minimum wage.

Increase

New Mexico

$7.50

Employers should apply the maximum $5.12 federal tip credit, even though the state-imposed maximum tip credit is higher at $5.37.

No change

New York

New York City's (NYC)  Large Employers (11 or more employees): $11.00 ($12.00 for fast food workers), effective December 31, 2016

NYC's Large Employers: $1.85 for service employees, $3.50 for food service workers, and $0.00 for fast food workers, effective December 31, 2016

Increase

NYC's Small Employers (10 or fewer employees): $10.50 ($12.00 for fast food workers), effective December 31, 2016

NYC's Small Employers: $1.75 for service employees, $3.00 for food service workers, and $0.00 for fast food workers, effective December 31, 2016

Long Island and Westchester: $10.00 ($10.75 for fast food workers), effective December 31, 2016

Long Island and Westchester: $1.65 for service workers, $2.50 for food service workers, and $0.00 for fast food workers, effective December 31, 2016

Remainder of New York: $9.70 ($10.75 for fast food workers), effective December 31, 2016

Remainder of New York: $1.60 for service employees, $2.20 for food service workers, $0.00 for fast food workers, effective December 31, 2016

North Carolina

$7.25

$5.12

No change

North Dakota

$7.25

$2.39

No change

Ohio

$8.15, if the employer's annual gross receipts are more than $297,000, effective January 1, 2017; otherwise $7.25

$4.07

Increase

Oklahoma

$7.25; the federal minimum wage rate applies because the state minimum wage is lower at $2.00 for employers with fewer than 10 full-time employees with gross annual sales of $100,000 or less

$3.625 ($1.00 if the employer has fewer than 10 full-time employees with gross annual sales of $100,000 or less)

No change

Oregon

$9.75 until June 30, 2017, then $10.25

$0.00; no tip credit allowed under state law

Increase

Pennsylvania

$7.25

$4.42

No change

Rhode Island

$9.60

Employers should apply the maximum $5.12 federal tip credit, even though the state-imposed maximum tip credit is higher at $5.71, effective January 1, 2017.

No change

South Carolina

No specific minimum wage rate under state law; the $7.25 federal minimum wage rate applies

No specific tip credit minimum under state law; the federal $5.12 maximum tip credit applies

No change

South Dakota

$8.65, effective January 1, 2017

$4.325

Increase

Tennessee

No specific minimum wage rate under state law; the $7.25 federal minimum wage rate applies

No specific tip credit minimum under state law; the federal $5.12 maximum tip credit applies

No change

Texas

$7.25

$5.12

No change

Utah

$7.25

$5.12

No change

Vermont

$10.00, effective January 1, 2017

$5.00

Increase

Virginia

$7.25

Employers should apply the maximum $5.12 federal tip credit, even though employers are not required to pay tipped employees a cash wage unless the employee demonstrates that tips do not equal at least the minimum wage.

No change

Washington

$11.00, effective January 1, 2017

$0.00; no tip credit allowed under state law

Increase

West Virginia

$8.75

Employers should apply the maximum $5.12 federal tip credit, even though the state-imposed maximum tip credit is higher at $6.13.

No change

Wisconsin

$7.25

$4.92

No change

Wyoming

The $7.25 federal minimum wage rate applies because the state minimum wage rate is lower at $5.15.

$3.02

No change

Employers may also want to be careful to take into account applicable local laws that set a higher minimum wage in certain cities or localities than the minimum wage generally applicable in the state.

By way of example, the following big cities or localities currently impose minimum wages that are higher than the statewide minimum wage of the state in which they are located:

  • New York: New York City, Long Island and Westchester.
  • California: Los AngelesSan Diego, and San Francisco (among numerous other cities in California).
  • Illinois: Chicago and Cook County.
  • Maryland: Montgomery and Prince George's Counties.
  • Maine: Portland.
  • New Mexico: Albuquerque and Santa Fe.
  • Washington: Seattle, SeaTac and Tacoma.

It is expected that this list will continue to grow in 2017.

Benjamin A. Anchill and Margaret Carroll Alli are attorneys with Ogletree Deakins in the Detroit metro area. © Ogletree Deakins. All rights reserved. Reposted with permission. 

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