Source: https://www.jdsupra.com/legalnews/minimum-wage-tipped-and-exempt-employee-40628/
Timestamp: 2018-12-11 23:15:01
Document Index: 328906972

Matched Legal Cases: ['art.\n2018', '§ 5', '§ 7', '§ 28', '§ 1', '§ 42', '§ 28']

Minimum Wage, Tipped and Exempt Employee Pay in 2019: A Rates-Only Update | Littler - JDSupra
Minimum wage laws can impact businesses of all sizes, whether operating nationwide, in multiple jurisdictions, or only in one state, county, or city. To help manage this challenge, we are publishing a rates-only update detailing state- and local-level wage increases that are scheduled to occur throughout 2019 so employers can determine the minimum amount they must pay non-exempt, tipped, and certain exempt employees.
Because pending or future legislation could change minimum wage rates that become applicable on January 1 or later in 2019, we recommend employers stay apprised of developments via our monthly article, WPI Wage Watch: Minimum Wage and Overtime Updates, and consult with counsel to confirm rates have not changed since publication.
White Collar Employee Pay Increases
7(i)-Type Commissioned Employees
Minimum Wage Increases1
January 1, 20193
California (25 or Fewer Employees)
California: Alameda (26 or More Employees)
$12.00 (1/1/19)
(State Rate Applied)
California: Alameda (25 or Fewer Employees)
$11.00 (1/1/19)
California: Belmont
$15.00 (10/1/18)
California: Cupertino
California: El Cerrito
California: Emeryville (56 or More Employees)
California: Emeryville (55 or Fewer Employees)
No Longer Applicable – 56 or More Employee Rate Applies
California: Los Altos
California: Los Angeles (26 or More Employees)
California: Los Angeles (25 or Fewer Employees)
California: Los Angeles (Hotels)
California: Los Angeles County (Unincorporated) (26 or More Employees)
California: Los Angeles County (Unincorporated) (25 or Fewer Employees)
California: Malibu (26 or More Employees)
California: Malibu (25 or Fewer Employees)
California: Oakland (Generally)
California: Oakland (Hotels – Health Benefits Provided)
$13.80 (1/1/19)
California: Oakland (Hotels – No Health Benefits)
California: Pasadena (26 or More Employees)
California: Pasadena (25 or Fewer Employees)
California: Redwood City (26 or More Employees)
California: Redwood City (25 or Fewer Employees)
California: Richmond (Without Benefits)
California: Richmond (With Benefits6)
California: San Francisco (Generally)
California: San Francisco (Government-Supported Employee)
California: San Jose7
California: San Leandro
California: San Mateo (Generally)
California: San Mateo (Non-Profit)
California: Santa Monica (26 or More Employees)
California: Santa Monica (25 or Fewer Employees)
California: Santa Monica (Hotels)
January 1 &
Maryland: Montgomery County (51 or more employees)
Maryland: Montgomery County (11-50 employees / 11 or more employees & either a 501(c)(3) or certain home health or community based services providers / 10 or fewer employees)
April 1, 2019 (est.)
Minnesota ($500,000 annual gross sales)
Minnesota (Less than $500,000 annual gross sales / Certain hotels, etc.)
Minnesota: Minneapolis, (101 or More Employees)
Minnesota: Minneapolis (100 or Fewer Employees)
New Mexico: Albuquerque (Without Benefits)
New Mexico: Albuquerque (With Benefits)
New Mexico: Bernalillo County (Unincorporated) (Without Benefits)
New Mexico: Bernalillo County (Unincorporated) (With Benefits)
New Mexico: Santa Fe9
New Mexico: Santa Fe County (Unincorporated)
New York: New York City (11 or More Employees)
December 31, 2018 & 2019
New York: New York City (10 or Fewer Employees)
New York: Nassau, Suffolk & Westchester Counties
New York: Remainder of State
New York: Fast Food Worker (New York City)
New York: Fast Food Worker (Elsewhere)
Washington: SeaTac (Hospitality & Transportation)
Washington: Seattle (Schedule 1 Hourly Minimum Wage)
Washington: Seattle (Schedule 1 Hourly Minimum Wage With Benefits)
No Longer Applicable – Schedule 1 Rate Applies
Washington: Seattle (Schedule 2 Hourly Minimum Wage)
Washington: Seattle (Schedule 2 Hourly Minimum Compensation)
In certain places, employers may be able to count tips an employee receives toward the minimum wage. In these jurisdictions, if the direct wage an employer pays an employee plus tips equals the minimum wage, an employer’s minimum wage obligation has been met. But, if the direct wage plus tips does not equal the minimum wage, an employer must pay the employee the difference. Directly below we highlight to the minimum cash wage (MCW) that may be paid, and the maximum tip credit (TC) that can be claimed, for covered tipped employees. Please note that, for increases occurring on dates other than January 1, the 2018 rate will be the minimum wage that was in effect before the 2019 rate increase takes effect, and that in the following states with 2019 rate increases, tip credits are prohibited (so they are not included below): Alaska; California; Minnesota; Montana; Nevada; Oregon; and Washington State.10 Finally, because New York has varying standards, the numbers are included in a stand-alone section after the below chart.
2018 MCW
2019 MCW
January 1, 201911
$4.4512
$4.3015
$2.13 (Suggested)
New Mexico: Santa Fe16
Tipped employee standards can be more complicated in New York, so we have given the Empire State its own section. First we discuss generally-applicable tip standards, followed by standards that apply in the hospitality industry, which vary depending on an employee’s role and the place of employment.
Generally: If an employee’s weekly tip average is less than the Low amount, a tip credit cannot be claimed. If an employee’s weekly tip average is between the Low (L) and High (H) amounts, the tip credit cannot exceed the Low amount. If an employee’s weekly tip average equals or exceeds the High amount, the tip credit cannot exceed the High amount.
$11.05 (L)
$9.80 (H)
$12.75 (L) $11.35 (H)
$1.95 (L)
$2.25 (L)
$10.20 (L)
$9.05 (H)
$11.45 (L) $10.20 (H)
$1.80 (L)
$2.95 (H)
$2.05 (L)
$3.30 (H)
$9.35 (L)
$8.25 (H)
$1.65 (L)
$8.85 (L)
$7.85 (H)
$9.45 (L)
$8.40 (H)
$1.55 (L)
$2.55 (H)
$10.05 (L)
$8.90 (H)
$1.75 (L)
$2.90 (H)
Service Employee: An employer must directly pay a service employee at least the hourly Cash Wage (CW), and cannot claim a tip credit that exceeds the hourly Tip Credit rate (TC). However, an employer’s ability to claim the tip credit is dependent on an employee’s weekly tip average equaling at least the hourly Tip Threshold (TT) (or TT(R) for resort hotel service employees) and an employee’s direct wage plus tips equaling or exceeding the minimum wage.
Jurisdiction Increase Date 2018 MCW 2019 MCW 2018 TC 2019 TC
Jurisdiction Increase Date 2018 TT 2019 TT 2018 TT(R) 2019 TT(R)
Food Service Worker: A food service worker must receive a wage of at least the hourly Cash Wage (CW), and a tip credit cannot exceed the below-specified hourly rate (TC) provided the total of tips received plus the wages equals or exceeds the hourly total minimum wage rate (MW). A tip credit is not permitted for fast food employees.
As employers wait to see whether – and to what extent – the U.S. Department of Labor will revise the minimum amount they must pay to executive, administrative, and professional employees for these workers to be exempt from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime requirements, state-law rates for these employees are scheduled to increase in 2019 (and on New Year’s Eve in New York). Also, under some state laws, these employees are exempt only from overtime requirements, meaning they must be paid at least the state minimum wage for all hours worked, and many of those state minimum wage rates are increasing in 2019. Additionally, in 2019 there will be state law increases in the minimum hourly pay required to qualify for state-law equivalent of the FLSA’s 7(i) retail or service establishment overtime exemption for employees paid commissions. Below we discuss these pay-related changes in 2019.
Under the FLSA, to be considered a bona fide executive, administrative, or professional employee, an individual must be compensated on a salary or fee basis (only for administrative and professional employees) at a rate of not less than $455 per week, excluding board, lodging, or other facilities. The $455 a week amount may be translated into equivalent amounts for periods longer than one week: $910 (Bi-weekly); $985.83 (Semi-monthly); $1,971.66 (Monthly); $23,660 (Annual). In various states, the minimum salary or fee amount exceeds the federal rate, and in 2019 pay requirements for these employees will change.
2018 Monthly Salary
2019 Monthly Salary
2018 Weekly Salary
2019 Weekly Salary
California18 (26 or More Employees)
Colorado19 (Executive or Supervisor) (Based on 40, 50, or 60 Hours Per Week)
Exceed $33,000
Exceed $2,750
Exceed $634.61
New York21 City (11 or More Employees) (Executive or Administrative)
New York City (10 or Fewer Employees) (Executive or Administrative)
$58,500 (12/31/19)
$4,875 (12/31/19)
$1,125 (12/31/19)
Nassau, Suffolk & Westchester Counties (Executive or Administrative)
$50,700 (12/31/19)
$4,225 (12/31/19)
$975 (12/31/19)
Remainder of New York State (Executive or Administrative)
$46,020 (12/31/19)
$3,835 (12/31/19)
$885 (12/31/19)
Oregon22 (General)
$21,320 (1/1/18)
$22,360 (7/1/18)
$22,360 (1/1/19)
$23,400 (7/1/19)
$1,776.67 (1/1/18)
$1,863.33 (7/1/18)
$1,863.33 (1/1/19)
$1,950 (7/1/19)
$410 (1/1/18)
$430 (7/1/18)
$430 (1/1/19)
$450 (7/1/19)
$23,400 (1/1/18)
$24,960 (7/1/18)
$24,960 (1/1/19)
$26,000 (7/1/19)
$1,950 (1/1/18)
$2,080 (7/1/18)
$2,080 (1/1/19)
$2,166.67 (7/1/19)
$450 (1/1/18)
$480 (7/1/18)
$480 (1/1/19)
$500 (7/1/19)
$20,800 (1/1/18)
$21,840 (7/1/18)
$21,840 (1/1/19)
$22,880 (7/1/19)
$1,733.34 (1/1/18)
$1,820 (7/1/18)
$1,820 (1/1/19)
$1,906.67 (7/1/19)
$400 (1/1/18)
$420 (7/1/18)
$420 (1/1/19)
$440 (7/1/19)
Although the minimum pay requirements are not currently scheduled to increase in 2019 in Connecticut or Iowa, under both states’ “short test”23 an employee must be compensated on a salary or fee basis – excluding boarding, lodging, or other facilities – in excess of the federal rate: $475 per week in Connecticut, and $500 per week in Iowa.
Additionally, California law provides that certain computer software employees, as well as licensed physicians and surgeons, are exempt from state overtime requirements if they receive a minimum hourly, monthly, or yearly rate, which is determined annually based on cost-of-living changes. Effective January 1, 2019, the computer software employee minimum hourly rate will increase from $43.58 to $45.41 per hour, the minimum monthly salary amount will increase from $7,565.85 to $7,883.62, and the minimum annual salary amount will increase from $90,790.07 to $94,603.25. For licensed physicians and surgeons, the minimum hourly rate of pay will increase from $79.39 to $82.72.
In various states, executive, administrative, or professional employees are exempt from state overtime requirements, but not exempt from state minimum wage requirements. In these jurisdictions, such employees must earn at least the applicable minimum wage for each hour worked. The minimum wage in some of these states will increase on January 1, 2019:24 Arizona ($11.00); Massachusetts ($12.00); New Jersey ($8.85); Rhode Island ($10.50); and South Dakota ($9.10).25
To qualify under the FLSA’s 7(i) overtime exception, the regular rate of pay of an employee of a retail or service establishment must exceed one-and-a-half times the federal minimum wage, and more than half the employee’s compensation for a representative period (not less than one month) must represent commissions on goods or services. In the following states with 2019 rate changes, the 7(i)-type exemption requires – in part – an employee’s pay to either equal or exceed one-and-a-half times the state minimum wage.26
California: An employee’s earnings must exceed one-and-a-half times the state minimum wage, which on January 1, 2019, will increase to $12.00 per hour for employers with 26 or more employees and to $11.00 per hour for employees with 25 or fewer employees.
Colorado: An employee’s regular rate of pay must be at least one-and-a-half times the state minimum wage, which on January 1, 2019, will increase to $11.10 per hour.
District of Columbia: An employee’s regular rate of pay must exceed one-and-a-half times the district minimum wage, which on July 1, 2019, will increase to $14.00 per hour.
Minnesota: An employee’s regular rate of pay must exceed one-and-a-half times the state minimum wage, which on January 1, 2019, will increase to $9.86 per hour for employers with $500,000 in annual gross sales, and to $8.04 per hour for employers with less than $500,000 in annual gross sales and certain hotels.
Nevada: An employee’s regular rate must exceed one-and-a-half times the state minimum wage, which potentially could increase on July 1, 2019, from $8.25 per hour if an employer does not offer health benefits or $7.25 per hour if health benefits are offered.
New York: The general wage order27 provides – in part – that employers must pay an employee for overtime at a wage rate of one-and-one-half times the employee's regular rate in the manner and methods provided in and subject to the exemptions of section 7 of the FLSA. However, it is unclear whether payment is based on the federal or state minimum wage. If the state minimum wage, the wage rate will increase on December 31, 2018 (“2018”), and on December 31, 2019 (“2019”). In New York City, the minimum wage applicable to employers with 11 or more employees will increase to $15.00 (2018 & 2019); the rate for employers with 10 or fewer employees will increase to $13.50 (2018) and $15.00 (2019). The minimum wage in Nassau, Suffolk, and Westchester Counties will increase to $12.00 (2018) and $13.00 (2019). Finally, in the remainder of New York State, the minimum wage will increase to $11.10 (2018) and $11.80 (2019).
Oregon: An employee’s regular rate of pay must exceed one-and-a-half times the state minimum wage, which on July 1, 2019, will increase to $12.50 per hour (urban), $11.25 per hour (general), and $11.00 per hour (non-urban).
Washington: An employee’s regular rate of pay must exceed one-and-a-half times the state minimum wage, which on January 1, 2019, will increase to $12.00 per hour.
1 Although we include examples of industry-specific minimum wage rates, this article’s purpose is to discuss rate changes that affect employers generally, so it may not necessarily cover all industry-specific rate changes; nor does this article discuss industry laws’ coverage requirements.
2 Chronologically, the increases will occur as follows: December 31, 2018: New York. January 1, 2019: Alaska; Arizona (incl. Flagstaff); Arkansas (but see Footnote 2); California (incl. Belmont, Cupertino, El Cerrito, Los Altos, Mountain View, Oakland, Palo Alto, Redwood City, Richmond, San Diego, San Jose, San Mateo, Santa Clara, Sunnyvale); Colorado; Delaware; Florida; Maine; Massachusetts; Minnesota; Missouri; Montana; New Jersey; Albuquerque, Bernalillo County (Unincorporated) and Las Cruces, NM; Ohio; Rhode Island; South Dakota; Vermont; Washington (incl. SeaTac, Seattle, Tacoma). March 1, 2019: Santa Fe and Santa Fe County (Unincorporated), NM. ~April 1, 2019: Michigan. July 1, 2019: Alameda, Berkeley, Emeryville, Los Angeles (Generally & Hotels), Los Angeles County (Unincorporated), Malibu, Milpitas, Oakland (Hotels), Pasadena, San Francisco, San Leandro, and Santa Monica, CA; District of Columbia; Chicago and Cook County, IL; Portland, ME; Montgomery County, MD; Minneapolis, MN; Oregon; Nevada. October 1, 2019: Delaware. December 31, 2019: New York.
3 This is based on the unofficial results for a November 6, 2018 ballot measure. Though the first increase is scheduled to occur on January 1, 2019, the official date will not be known until the election results are certified, so it is technically possible the first increase could occur slightly after January 1.
4 This is based on the unofficial results for a November 6, 2018 ballot measure.
5 On or before February 18, 2019, the City Manager must present a report to the City Council about the law’s impact. As soon thereafter as practical, the City Manager must request direction from the Council to amend the law to increase the minimum wage as follows: $14.25 (July 1, 2019); $15.00 (July 1, 2020); Beginning July 1, 2022, and each July 1 after, the minimum wage must be adjusted according to a change in the consumer price index. Pasadena, CA Code § 5.02.065.
6 If an employer pays at least $1.50 per hour per employee towards an employee medical benefits plan, which allows the employee to receive employer-compensated care from a licensed physician, the employer can pay employees $1.50 per hour less than the minimum wage. Richmond, CA Code § 7.108.040.
7 San Jose also permits certain employers to pay a “Youth Training Program” minimum wage, which requires an employer to submit an exemption application. If approved, the city would determine the applicable rate.
8 This is based on the unofficial results for a November 6, 2018 ballot measure. At the time of publication, the results are not expected to be official until November 30, 2018. Missouri Secretary of State, Unofficial Election Results Expected to Be Certified Nov. 30 (last visited Nov. 13, 2018).
9 Although the ordinance uses “Beginning January 1, 2009, and each year therafter [sic]. . . .” the City of Santa Fe has routinely adjusted its rate on March 1. See Santa Fe, NM Code § 28-1.5(B).
10 2018 amendments to Michigan’s minimum wage gradually decrease the tip credit, and eliminate it in 2024. However, legislative efforts are underway to reinstate the tip credit, so Michigan’s inclusion on the list of states banning tip credits might be short-lived. Likewise, in 2018 D.C. voters approved gradually reducing, then eliminating, the tip credit, but, as noted earlier, the Council of the District of Columbia has taken steps to roll back these changes. However, as noted in October’s Wage Watch article, there is a possibility a voter referendum could be held on the Council’s action, which, if successful, would undo the Council’s undoing of Initiative 77.
11 This is based on the unofficial results for a November 6, 2018 ballot measure. Though the first increase is scheduled to occur on January 1, 2019, the official date will not be known until the election results are certified, so it is technically possible the first increase could occur slightly after January 1.
12 This is based on the “Tipped Wage Workers Fairness Amendment Act of 2018” becoming officially enacted. The bill was approved by the Council of the District of Columbia, signed by the mayor, and published in the D.C. Register, but at the time of publication had not completed the required review by the U.S. Congress (30 legislative session days). A separate emergency bill holding back the first voter-approved tipped employee minimum cash wage increase / tip credit decrease will expire on January 3, 2019. However, it is anticipated that the D.C. Council will pass a new emergency measure that would maintain the status quo until the Tipped Wage Workers Fairness Amendment Act of 2018 could become officially enacted and repeal Initiative 77, which was approved by voters at the June 19, 2018 election.
13 Beginning on July 1, 2017, and on every July 1 thereafter, qualified tipped employees must be paid the greater of: (A) the FLSA minimum cash wage; (B) the state minimum cash wage; or (C) the city's minimum cash wage from the previous year, increased in proportion to the increase, if any, in the CPI. Chicago, IL Code § 1-24-020.
14 Beginning on July 1, 2018, and on each July 1 after, qualified tipped employees must be paid the greater of: (A) the FLSA minimum cash wage; (B) the state minimum cash wage; or (C) the city's minimum cash wage from the previous year, increased in proportion to the increase, if any, in the CPI. Cook County, IL Code § 42-10.
15 This is based on the unofficial results for a November 6, 2018 ballot measure. At the time of publication, the results are not expected to be official until November 30, 2018. Missouri Secretary of State, Unofficial Election Results Expected to Be Certified Nov. 30 (last visited Nov. 13, 2018).
16 Although the ordinance uses “Beginning January 1, 2009, and each year therafter [sic]. . . .” the City of Santa Fe has routinely adjusted its rate on March 1. See Santa Fe, NM Code § 28-1.5(B).
17 An employee must be paid on a salary or fee basis at a rate of not less than 2 times the state minimum wage for the first 40 hours of employment each week, excluding employer-furnished board or lodging.
18 An earn must a monthly salary equivalent to no less than 2 times the state minimum wage for fulltime employment (employment in which an employee is employed for 40 hours per week).
19 An executive or supervisor employee must earn in excess of the equivalent of the minimum wage for all hours worked in a workweek.
20 An employee’s regular compensation, when converted to an annual rate, must exceed 3,000 times the state minimum wage or the annualized FLSA rate set by the U.S. Labor Department, whichever is higher.
21 An executive or administrative employee must be paid for services a salary, including board, lodging, or other allowances and facilities.
22 An employee must earn a salary and be paid on a salary basis, excluding board, lodging, or other facilities. A salary is no less than the state minimum wage multiplied by 2,080 hours per year then divided by 12 months. It is a predetermined amount constituting all or part of the employee's compensation paid for each pay period of 1 week or longer (but not to exceed 1 month).
23 Most tests for determining whether an employee is exempt contain a duties component and a pay component. Some states may use a two-test setup – a “long” and “short” test – similar to older versions of the FLSA’s white collar employee regulations. Satisfying either test will result in the employee being exempt from minimum wage and/or overtime standards, depending on the jurisdiction. The “short” test includes a less demanding duties component, but a more demanding pay component, whereas the “long” test has a more demanding duties component and a less demanding pay component.
24 Also, in Arizona and Illinois, there are local minimum wage rates that exceed the state rate. The rates are noted in the Minimum Wage Increases & Tipped Rate Increases section of this article.
25 Nevada’s minimum wage rate – $8.25 or $7.25 depending on whether health benefits are offered – may increase in July 2019, but an announcement will not occur until later in 2019. Additional states in which such employees are entitled to be paid the minimum wage include: Georgia; Illinois (where local rates are increasing in Chicago and Cook County); Massachusetts; North Dakota; Utah; and Wisconsin. In New Hampshire, such employees must be paid the federal minimum wage. In Virginia, although there is not a relevant exemption from the state minimum wage, the term “employee” does not include any person whose employment is covered by the FLSA.
26 Similar requirements exist in Indiana, Pennsylvania, North Dakota, and Wisconsin, but the minimum wage in each state is the same as the FLSA rate: $7.25 per hour. Connecticut has a state minimum wage that exceeds the FLSA rate – $10.10 per hour – and, in its 7(i)-type exception, pay – in part – is pegged to the state minimum wage (regular rate of pay exceeds two times that rate), but it does not currently have a 2019 minimum wage increase scheduled.
27 The commissioned employee exemption is not incorporated or available in the building services and hospitality industry wage orders.