Challenges Ahead for Federal Minimum Wage Law Likely to Far Exceed States’ Current Rules
Now that the Senate parliamentarian has removed consideration of the $15 per hour minimum wage from the “American Rescue Plan,” many people wonder what comes next. While President Biden and congressional leaders try to figure out a legislative strategy for genuine COVID-19 relief, American workers are trying to figure out how the eventual resolution will affect them.
The answers to workers’ questions about minimum wage amounts and regulations depend on where they live, how many hours they work, what kind of work they do, how many employers work where they work, and how much revenue their employer makes. In short, it’s complicated.
The federal law governing minimum wage is the Fair Labor Standards Act (FLSA). This law covers non-exempt employees and has mandated a $7.25 minimum wage since 2009. But that amount only governs the wages of workers who live in states without their own minimum wage laws. And exceptions exist for many with special circumstances, such as student status, youths under 20, salespersons who work on commission, workers on small farms and tip earners.
The Federal minimum wage currently has its own exemptions. It only applies to employees of companies with $500,000 gross incomes or those engaged in interstate commerce or production of goods that travel interstate. It also covers all government workers and most domestic workers.
Before covering the exemption rules, a brief review of state minimum wage laws will be instructive. Ten states have no minimum wage laws of their own. These are Alabama, Louisiana, Mississippi, South Carolina, Tennessee, Georgia, Indiana, Iowa, Kansas and Kentucky. The absence of state laws means that the FLSA governs non-exempt workers in those states, so they earn the prevailing $7.25.
The next possibility governs workers who live in states with minimum wage laws that match FLSA’s. There are eight of these: North Carolina, North Dakota, New Hampshire, Oklahoma, Pennsylvania, Texas, Virginia and Wisconsin.
The remainder of states and the District of Columbia have minimum wage requirements that exceed the FLSA. Minimum wages in these states range from a low of $8.65 per hour in Florida to highs of $15 per hour in Washington, D.C. and New York City.
California’s rate is now $13.00 for employees who work in businesses with less than 25 employees and $14 for those with more than 26 co-workers. All California workers will earn $15 per hour by 2023. Most other states come in between $8.65 and $12 (e.g., Connecticut, Oregon and New Jersey). Washington State currently requires $13.69 per hour.
The California example demonstrates the complexity of the minimum wage situation as business size, local laws and legislation that requires sliding increases all weigh in on necessary amounts. For example, Minnesota now requires $10.08 for companies with gross revenues of $500,000, while workers at companies that earn less now receive $8.21 per hour. Missouri has a minimum wage of $10.30 but totally exempts companies with earnings of less than $500,000.
Most states and the federal government also require overtime or “premium” wages for those who work more than 40 hours per week or more than eight hours per day. Premium rates apply in Arizona, Colorado, Maryland, New Hampshire, New Hampshire, New Jersey, Ohio, Rhode Island, South Dakota, Vermont, Washington, and West Virginia. Connecticut has higher minimums for people working in hotels and restaurants and for seven days of consequent work. Minnesota’s premium rates apply after 48 hours; North Carolina’s after 45.
There are also many exemptions from premiums for overtime pay. These include: workers who get a commission from sales; computer professionals who already earn $27.63 per hour; some drivers, loaders and mechanics; and farmworkers employed on small farms. Many seasonal employees are exempt from both minimum wage and overtime pay, as are executives and administrators who receive a yearly salary of a certain amount.
Other states, such as New York and Oregon, require different minimum wages for workers in different locations within their states. New Yorkers in New York City get $15, those who work in Westchester and Long Island receive $14, and all other New Yorkers get $12.50. In Oregon, standard wages are $12 per hour while those workers in Portland Metro get $13.25, and employees in “Non-urban areas” get $11.50.
All these examples point out the vast differences that currently exist and can provide a rationale for the variances that take into account business revenues, valid exemptions, and the disparities in the cost of living in different places. Several legislators have suggested that any new federal law take these differences into account.
In fact, in 2019 Congresswoman Terri Sewell (D-AL) and a dozen of her fellow democrats proposed calculating minimum wage based on “regional costs of living and purchasing power.” Named “Paying Hourly Americans Stronger Earnings (PHASE),” a press release from Sewell said the bill would take “into account that the cost of living in Selma, Alabama is very different than New York City.” Co-sponsor Rep. Lucy McBath (D-GA) also stressed the need to raise the federal minimum in ways that “make sense for big metropolitan cities, small rural towns and every place in between.”
Basically, this proposal would group metropolitan areas by their U.S. Census data into five tiers based on comparative purchasing power as determined by the Bureau of Economic Analysis. There would then be a two-year phase-in and a readjustment requirement every three years, based on a variety of data.
Recognizing valid differences while always being aware of the compelling arguments of progressives such as Senator Bernie Sanders (I-VT) will be challenging. Sanders is asking his fellow Democrats to “ignore” the parliamentarian's ruling. He plans to force a Senate vote on an amendment to the “American Rescue Plan,” which includes the minimum wage hike. His office released a statement on March 1 in conjunction with his amendment in which he stated, “At a time when millions of workers are earning starvation wages, when the minimum wage has not been raised by Congress since 2007 and stands at a pathetic $7.25 per hour, it is time to raise the minimum wage to a living wage.” The White House does not plan to try to overrule the parliamentarian.
Most commentators agree that COVID relief is imminent and that minimum wage must wait its turn. The disparities in state laws and their exemptions could signal legal challenges in the future, and figuring out how to craft a new law that is fair to all will be extremely difficult.
