3 Tips For Handling This Year’s Minimum Wage Increases

Workers in half of the United States are seeing minimum wage increases in 2021, meaning employers and employees alike will need to stay abreast of changes that can affect various types of compensation beyond workers’ regular pay, experts told Law360.

The statewide wage floor will go up in 25 states this year, according to a Law360 tally. And several major cities, including Los Angeles; Chicago; Denver; and Portland, Oregon, are seeing increases as well.

Some of the changes are small, like in Minnesota, where the wage floor went up this year from $10 to $10.08 per hour. In other places, the increase is more significant. Virginia will see the biggest boost of any state this year on May 1, when the minimum wage rises to $9.50 per hour from the federal minimum of $7.25.

Here, Law360 takes a look at what employment lawyers should keep in mind as wages rise around the country.

Update Your Processes In Time

While many minimum wage increases went into effect New Year’s Day, some will take effect later this year. But whenever the change happens, employers and workers need to be ready for it, attorneys said.

Some worker advocates who spoke with Law360 predicted the increases could lead to an uptick in wage and hour lawsuits.

“We have seen cases where, once COVID hit, people were shaving hours, manipulating time cards [and] things like that. And I certainly would expect to see it as a result of this as well,” said Ryan Morgan, the co-chair of the employee rights group at Morgan & Morgan PA.

The responsibility to ensure workers get paid what they’re owed ultimately falls to the employer, but businesses that work with a payroll company should make sure their providers’ systems are updated to reflect new minimum wage rates, Morgan suggested.

Awareness can be more of a challenge for workers, said Edgar Ndjatou, the executive director of the worker advocacy group Workplace Fairness.

Even though state minimum wage levels are a matter of public record, workers may not be aware that they can go to the U.S. Department of Labor and its state-level counterparts for information, he said.

Moreover, the COVID-19 pandemic has limited worker interactions that might otherwise allow for peer-to-peer information sharing.

“It’s one thing if people get together and say, ‘Did you hear about this? There’s a minimum wage increase.’ But now, if people are not in the same room as much, the ability to provide awareness might be curtailed,” Ndjatou said.

Get Into the Weeds

Minimum wage laws can differ greatly across jurisdictions, so it’s important to know which one applies where.

“As states and local municipalities continue to pass regulations and the federal-level minimum wage stays pretty stagnant, employers are going to have to keep track and understand what the current minimum wage is in the jurisdictions in which they have employees,” said Chuck McDonald, a shareholder at management-side firm Ogletree Deakins Nash Smoak & Stewart PC.

Large employers with workers in many different jurisdictions should pay special attention to the details of each jurisdiction. Some legislation sets different minimum wage rates for employers of different sizes, or those that offer certain benefits versus those that don’t.

“Ten years ago, state law was mostly all anybody had to worry about,” McDonald said. “Now you’ve got to go down one more level to the county, city and municipalities.”

Beyond simply complying with the law, businesses should consider the implications of rising minimum wage rates on workforce morale, said Michael Schmidt, the vice chair of the labor and employment practice at management-side firm Cozen O’Connor.

“If you’re raising the wages that the lowest rung of employees get, that’s by definition going to be closing the gap between those lower wage earners and some of your other wage earners in the company,” he said.

Employers should also make sure they’re not opening themselves to discrimination claims if they change workers’ schedules in response to pay floors going up, said Ndjatou of Workplace Fairness.

“If they think that they can’t afford to pay everyone the new minimum wage, they might decide to cut back hours or readjust schedules,” he said. “Where sometimes employers may run afoul is if they don’t do those things equitably.”

Keep an Eye On Other Obligations

A rise in the minimum wage doesn’t only affect workers’ hourly pay. It might also have impacts on other compensation obligations that are based on employees’ regular rate of pay.

“If the minimum wage goes up, then what you’ve got to pay for paid sick leave, report-to-work pay [and] some of those other ancillary requirements are going to be impacted as well,” said Ogletree’s McDonald.

Additionally, a rise in the minimum wage could also affect whether certain employees qualify as exempt from overtime and other pay requirements.

In California, for instance, certain employees must earn at least twice what they would be paid for 40 hours per week of work at the state minimum wage rate in order to qualify as exempt from overtime requirements. When the minimum wage goes up, so does that threshold, said Zach Hutton, a partner at management-side firm Paul Hastings LLP.

“It’s important that employers not just increase the minimum wage paid to non-exempt employees, but also see whether they need to increase the salaries of some exempt workers,” Hutton said.

Lew Maltby, the president of the National Workrights Institute, predicted that such exemptions will be the basis for an increasing number of complaints against employers.”It happens all the time and it’s going to happen more now,” Maltby said. “When the minimum wage goes up, especially when it goes up substantially, an employer’s potential benefit from cheating goes up too.”

This blog is printed with permission.

About the Author: Mike LaSusa is a senior employment reporter for the legal news service Law360, where he focuses on the laws and regulations surrounding pay for workers.

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Madeline Messa

Madeline Messa is a 3L at Syracuse University College of Law. She graduated from Penn State with a degree in journalism. With her legal research and writing for Workplace Fairness, she strives to equip people with the information they need to be their own best advocate.