Due to the upcoming increase in the federal minimum wage rate, several states with minimum wage rates tied to federal rate will see changes as well. The law provides for a three-step increase in the federal minimum wage, beginning with an initial increase from the current $5.15 per hour to $5.85 per hour effective July 24, 2007. The federal minimum wage will increase again one year later, to $6.55 per hour, and again two years later, to $7.25 per hour.
Impacted states
Employers of employees who are subject to both state and federal minimum hourly wage rates will have to comply by paying the employee the greater of the two rates. In addition, there are several states whose wage rates are tied to changes in the federal rate. The following states will automatically see increases in their state hourly minimum wage rate on July 24, 2007:
- Idaho. H.B. 184, L. 2007, provides that state law is to conform to and be on track with the federal minimum wage rate. When the federal minimum wage increases, the state is to increase accordingly.
- Indiana. H.B. 1027, L. 2007, provides that the state minimum wage rate for employers of two or more employees in any work week on or after June 30, 2007, is to be not less than that of the federal minimum hourly wage rate. Increases to the federal minimum wage and training wage would be automatically adopted by the state, by reference, effective July 1, 2007.
- Kentucky. Kentucky law provides that employers must pay no less than the federal minimum hourly wage rate, adopting the federal rate automatically by reference. However, Kentucky’s minimum hourly wage rate is also scheduled to increase to $5.85 per hour but on June 26, 2007. Scheduled increases also include an increase to $6.55 per hour on July 1, 2008, and to $7.25 per hour on July 1, 2009 (H.B. 305, L. 2007).
- New Hampshire. New Hampshire law states that if the federal minimum wage rate is higher than the state rate, then the federal rate would apply. Currently, the minimum wage rate in New Hampshire is $5.15 per hour, so this state would see the federal increase on July 24. However, the state minimum wage rate is scheduled to increase to that of $6.50 per hour on September 1, 2007, and again to $7.25 per hour on September 1, 2008 (H.B. 514, L. 2007). Thus, the federal increase would apply only until September 1 of 2007.
- North Dakota. H.B. 1454, L. 2007, provides that the state minimum wage rate would increase to $5.85 per hour if legislation increasing the federal rate is approved, effective on the same date the federal rate increases (July 24, 2007). The minimum wage rate for North Dakota would increase again to $6.55 per hour one year later and then to $7.25 per hour two years later, coinciding with the federal rate changes.
- Oklahoma. Oklahoma law states that the state minimum wage rate is to be the same as the federal minimum hourly wage rate. The state minimum wage rate applies to employers having 10 or more employees at one location and also to employers having gross annual sales of over $100,000, regardless of how many employees are employed. For all others, a minimum wage rate of $2.00 per hour applies.
- South Dakota. S.B. 207, L. 2007, provides that the state minimum wage rate will increase to $5.85 per hour when the federal minimum wage rate increases or on July 1, 2007, whichever is later. Thus, South Dakota's minimum wage rate will increase to the new federal rate on the same date the federal rate increases, July 24, 2007. The state minimum wage would increase to $6.55 per hour one year later and then again to $7.25 per hour two years later, in alignment with the federal rate changes.
- Texas. Texas law provides that the state minimum wage rate is to be the same as the federal rate. Thus, the minimum wage in Texas will increase to $5.85 per hour on July 24, 2007.
- Virginia. Virginia law provides that the state minimum hourly wage rate is to be the same as the federal rate. Thus, the minimum wage rate in Virginia will increase to $5.85 per hour on July 24, 2007. The state's minimum wage applies to employees of employers having four or more employees (not including family members) who are age 16 and over.
Other States
In other states, Georgia (employers of six or more employees, sales of over $40,000 annually), Nebraska, New Hampshire, New Mexico, Utah and Wyoming, the minimum wage rates are currently set as the same as the current federal minimum wage rate of $5.15 per hour. In Georgia, state law specifically provides that employers subject to the minimum wage provisions of any act of Congress are exempt from state law if the act of Congress provides for a minimum wage rate that is greater than the state's rate. Note, however, that in New Hampshire, the state minimum wage rate is scheduled to increase to $6.50 per hour on September 1, 2007, and in New Mexico, the minimum wage will increase to $6.50 per hour on January 1, 2008. The minimum wage rate in Kansas at $2.65 per hour is the lowest in the nation (Washington, at $7.93, has the highest state wage rate). Alabama, Louisiana, Mississippi, South Carolina and Tennessee do not have state laws specifying minimum wage rates, thus the federal minimum wage rate applies in these states.
The following states have minimum wage rates that, on July 24, 2007, will remain higher than the federal minimum hourly wage rate: Alaska ($7.15 per hour); Arizona ($6.75 per hour); Arkansas ($6.25); California ($7.50); Colorado ($6.85); Connecticut ($7.65); Delaware ($6.65); Florida ($6.67); Hawaii ($7.25); Illinois ($6.50; eff. 7/1/2007, $7.50); Iowa ($6.20); Maine ($6.75; eff. 10/1/2007, $7.00); Maryland ($6.15); Massachusetts ($7.50); Michigan ($7.15); Minnesota ($6.15, for employees of employers with $625,000 or more in gross sales only; the rate is $5.25 for employees of small employers); Missouri ($6.50); Montana ($6.15, large employers only; a $4.00 rate applies to employees of employers with annual gross sales of $110,000 or less); Nevada ($6.15 if no qualified health insurance plan provided; eff. 7/1/2007, $6.33 per hour if no health insurance plan provided) (minimum wage for employees of employers providing qualified health insurance plans is $5.15 per hour with a scheduled increase to $5.30 per hour on 7/1/2007); New Hampshire (eff. 9/1/2007, $6.50); New Jersey ($7.15); New York ($7.15); North Carolina ($6.15); Ohio ($6.85, ages 16 and over); Oregon ($7.80); Pennsylvania ($6.25; eff. 7/1/2007, $7.15) ($5.65 if there are 10 or fewer employees; eff. 7/1/2007, $6.65 if there are 10 or fewer employees); Rhode Island ($7.40); Vermont ($7.53); Washington ($7.93, ages 16 and over); West Virginia ($5.85; eff. 7/1/2007, $6.55); and Wisconsin ($6.50, nonagricultural employments). In the District of Columbia the minimum wage rate is $7.00 per hour.
Areas outside the continental U.S.
The Commonwealth of the Northern Mariana Islands and American Samoa. H.R. 2206 also provides for gradual step increases to bring minimum wage rates in both the Commonwealth of the Northern Mariana Islands and in American Samoa up to par with the federal rate, with 50-cent-an-hour step increases (or a lesser amount as necessary to equal the federal rate).
For American Samoa, the 50 cent increases would apply to the applicable wage rate in each industry and classification under 29 C.F.R. section 697 at time of enactment, starting with the first increase on July 24, 2007, and then increasing annually until the wage rate for American Samoa is the same as the federal rate. In the Northern Mariana Islands, the minimum wage in the Commonwealth would first increase to $3.55 per hour, beginning the same date as the federal rate change (July 24, 2007), followed by 50-cent step increases beginning one year after enactment and continuing annually until aligned with the federal rate.
Puerto Rico. In the Commonwealth of Puerto Rico, workers subject to the federal Fair Labor Standards Act would be subject to the federal minimum wage rate. Otherwise, 70% of the federal minimum wage rate would apply. Higher rates would apply if established in mandatory decrees affecting various occupations and industries. For public employees, the Secretary of Labor and Human Resources is to fix the minimum wage rate for all public employees except municipal employees at a wage rate equal to the federal minimum wage rate or $5.80 per hour, whichever is higher.
Reprinted with permission. © CCH