Thursday, August 6, 2015

Research Q of the Week: Figuring out Minimum Wage—May Require Some Coffee (8/6/15)

Question: How do we figure out the correct minimum wage to pay city employees?

Answer: To make this more appealing, let's imagine that it’s a bit like making coffee. Before you get that black wake-up brew, you have to pick the right filters to use. Specific bits of state and federal law both apply as these filters. Before we start filtering note that city councils may choose to pay anyone more than applicable legal minimum wage—you just cannot pay less.

Large vs. small employers
State law now requires a higher minimum wage than federal law, so let’s start there. State law requires that you filter out large vs. small employers. If your city’s total budget hits $500,000, your city is a large employer and must pay a higher minimum wage.

But what’s included in that “total budget” calculation? Toss in all enterprise funds such as sewer/water or municipal liquor stores. Do not include separate legal entities in this mix such as housing redevelopment authorities (HRAs) and economic development authorities (EDAs). If this filter applies to your city, run this one by the city attorney.

So as of Aug. 1, 2015 large employers must pay eligible employees $9 per hour. Small employers, cities with a total budget of less than $500,000 must pay $7.25 per hour.

Youth, training rates
Now let’s look at specific employees as another filter. If your city employs young people under the age of 18 you may pay them a “youth rate” of $7.25 per hour, whether your city is a large or small employer. Note that this is the same rate small employers pay everyone as of Aug. 1, 2015 so this is a filter that large employers may use.

Another filter is the “training rate.” If your city employees anyone under 20, under state law, you may pay that person $7.25 for the first 90 days, if your city chooses to do so. Again, this filter is useful for large employers, not small employers because they must pay everyone at least $7.25 per hour. After 90 days, a large employer must pay the current minimum wage of $9 per hour. Unless another unusual filter fits.

Exemptions fall back on federal rate
State law exempts some workers altogether. Here’s a partial list: elected officials; city board, commission, or committee members; city volunteers; city police or firefighting personnel; park and rec workers under age 18 who work less than 20 hours per week; and those employees who cannot participate in the Public Employees Retirement Association (PERA).

This last filter, those who are exempt altogether from state minimum wage law, includes students under the age of 23, and some student interns. This filter is complicated so if you want all the details, call or email research (800) 925-1122, (651) 281-1200, research@lmc.org. Remember, if any of your city’s employees are exempt from state minimum wage, the federal minimum wage of $7.25 per hour applies. Federal law also allows a youth minimum wage of not less than $4.25 an hour for employees who are under 20 years of age but only for the first 90 consecutive days.

Yup, that's a lot of filters. Time for some coffee.

Written by Jeanette Behr, research manager with the League of Minnesota Cities. Contact: jbehr@lmc.org or (651) 281-1228.

This blog post conveys general information. It’s not legal advice. Please check with your city attorney before acting on this information.

4 comments:

  1. We’ve updated this to clarify that state minimum wage law exempts high school or college students who enrolled full time and under age 23.

    ReplyDelete
  2. Do those making tips, such as liquor store bartenders, have to be paid the minimum wage?

    ReplyDelete
  3. Yes. Under state minimum wage law, those making tips must be paid the state minimum wage if they are eligible employees. Quoting the Minnesota Department of Labor and Industry (http://www.dli.mn.gov/LS/MinWage.asp) under the heading Tip credit:
    "No employer may take a tip credit against minimum wages in Minnesota. An employee must be paid at least that minimum wage per hour plus any tips the employee might earn."

    ReplyDelete
  4. Also, please note that this blog and any comments or responses to comments are not specific legal advice.

    ReplyDelete

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