The Rise of the Minimum Wage

For the first time in nearly a decade, the Minnesota minimum wage in on the rise. I wrote a rundown of the changes when the increase became law in April. That article is reprinted below.

Minimum wage is on the rise

It’s official.  Come August, the Minnesota minimum wage is going up.  This week, Governor Mark Dayton signed an increase to the minimum wage into law.  It will rise to $8 per hour in August, and by 2016 it will reach $9.50.  The new law also pegs the minimum wage to inflation, so it will regularly increase without legislative action.

So how will your business be affected?

The Minnesota minimum wage is currently $6.15 per hour, one of the lowest rates in the country.  Because it’s less than the federal minimum wage, most employers are required to pay their employees at the national rate of $7.25 per hour.  Once the increased state minimum wage takes effect, employers will be required to pay workers at the new, higher Minnesota rate.

The minimum wage be implemented gradually, going up every August for the next three years.  In 2014 it will increase to $8.00 per hour, in 2015 to $9.00 per hour, and in 2016 to $9.50 per hour.

Beginning in 2018, the minimum wage will increase once a year by the rate of inflation.  However, it will never increase by more than 2.5 percent, and the Department of Labor and Industry will be able to suspend automatic increases if economic data indicates the “potential for a substantial downturn in the state’s economy.”

Are there exceptions?

Yes, but they are limited.  The new law will increase the minimum wage for the majority of workers, but there are a few exceptions.

Small employers currently have a lower minimum wage than their large competitors, and this will still be true once the new law kicks in.  Under current Minnesota law, any employer with an annual gross volume of sales less than $625,000 is considered a small employer and is only required to pay employees $5.25 per hour.  The new law limits the gross sales small employers can make to $500,000 (in line with the federal standard).  It also increases the minimum wage for employees at those companies to $6.50 in 2014, $7.25 in 2015, and $7.75 in 2016.

Date of Increase	Big Employer Minimum (over $500,000 gross)	Small Employer Minimum (under $500,000 gross)
August 1, 2014	$8.00	$6.50
August 1, 2015	$9.00	$7.25
August 1, 2016	$9.50	$7.75
January 1, 2018 – onward	Inflation based increase not more than 2.5 percent	Inflation based increase not more than 2.5 percent

If you believe your business may be qualified for an exemption, it is best to consult an experienced employment attorney.