New Minimum Wage Rates Take Effect January 1

New  Minimum Wage Rates Take Effect January 1

Effective on New Year’s Day, increased minimum wage rates go into effect across Minnesota and an even higher rate takes effect in Minneapolis. Effective January 1, large Minnesota employers (i.e., those with annual gross revenue of $500,000 or more) must pay non-exempt employees a minimum wage of no less than $9.65 per hour. Small employers must pay no less than $7.87 per hour.

Note that Minnesota’s minimum is higher than the federal rate ($7.25 per hour). The higher Minnesota rate controls for person working in Minnesota.

To further complicate matters for the state’s largest city, at that same time the new Minneapolis $15 per hour minimum wage begins its 5-year phase-in period. This means that on January 1, 2018, large businesses (defined not by revenue but by number of employees, 100 or more) will be required to pay a minimum wage of $10 per hour.

Six months later, on July 1, 2018, that minimum wage rate jumps 12.5% to $11.25. At that time, small businesses (fewer than 100 employees) too will be affected and will be required to pay $10.25 per hour.

Every July 1 thereafter, the large employer rate will increase by $1 per hour until it caps out at $15 on July 1, 2022. The small employer rate will increase by $.75 in 2019, 2020 and 2021, then $1 in 2022 and 2023. In 2024, the rates for large and small employers will be the same. Thereafter, there will be mandatory annual adjustments for inflation.

Employers outside the city who send people into Minneapolis for work will also be required to pay those workers the Minneapolis minimum for time worked in the City of Minneapolis, if the employee performs at least two hours of work in a calendar week (Monday to Sunday) within the city limits​.

Like all things wage-related, affected employers must display a notice poster in each of their Minneapolis facilities in a visible and accessible location. The poster should be displayed where employees can easily read it. The poster must be in English and in each of the primary language(s) spoken by employees at the particular workplace.

It is worth noting that these new rates apply only to non-exempt employees. The current minimum weekly rate for exempt employees is $455 per week (annualized at $23,725). Assuming a 40-hour workweek, this comes to $11.38 per hour, creating at least a theoretical possibility that non-exempt, entry-level, unskilled and untrained employees will make more than some exempt employees.

And don’t even think about trying to covert non-exempt employee to exempt status to avoid the progressive increases. Employers do not have much if any discretion in determining what positions will enjoy exempt status. The government has specific criteria for making that determination and the cost of getting the exempt/non-exempt distinction wrong can be very expensive.


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Bill Egan

Bill Egan

I have 30+ years of experience representing executives, business owners, private enterprises and small-to-midsize public companies as an advisor, counselor and advocate on matters relating to the employment relationship. Informed by years of experience with both routine and unusual employment relationships and workplace situations, I bring a pragmatic, realistic and results-oriented perspective to issues arising in the workplace. Read Bill's Bio.

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