Focus on New Laws: Minimum Wage

New minimum wage effective Aug. 1, 2014, is based on the employer gross revenues.
(Published Jul 14, 2014)

A 2014 law, Chapter 166, phases in increases in the Minnesota minimum wage, starting Aug. 1, 2014.

How does this law affect your city? There are two steps to take to figure that out. First, determine whether your city is a large or small employer according to the law. Second, determine whether a particular employee is covered by the law.

Is your city a large or small employer?
A “large employer” has “annual gross volume of sales or business done” of more than $500,000. Let’s call this revenue. (The previous large employer definition used a threshold of $625,000, so this law change effectively classifies more cities as large employers.) A “small employer” has revenues of less than $500,000.

Under the new law, effective Aug. 1, 2014, large employers must pay employees covered by the law at least $8 per hour. Small employers must pay employees covered by the law at least $6.50 per hour.

The League generally suggests using the city’s total budget to determine whether a city is a large or small employer. For cities, “annual gross volume of sales or business done” probably means the city’s total budget. However, the League is in contact with the Department of Labor and Industry seeking additional guidance for cities on what to include when calculating whether your city is a large or small employer. We will share information as soon as possible.

Which employees are covered?
Now on to the second step. Which employees are not covered by the law? For younger workers, there are two exceptions. First, large employers must pay employees under age 18 at least $6.50 per hour. Second, all employers may choose to pay employees under age 20 not less than $6.50 per hour, but only for their first 90 consecutive days of employment. After the 90 days, the minimum hourly rate becomes $8 if the employer is a large employer. Both of these rates are effective Aug. 1, 2014, and both amounts are scheduled to increase each year.

There are other employees who are not covered. Minimum wage requirements do not apply to elected officials; individuals who serve on any governmental board, commission, committee, or other similar body; city volunteers; any individual employed, directly or indirectly, by the city to provide police or fire protection services; individuals under the age of 18 working less than 20 hours per workweek for a municipality as part of a recreational program; or employees of housing and redevelopment agencies and most port authorities.

On Aug. 1, 2015, the Minnesota minimum pay rate will increase to $9 per hour for large employers, and $7.25 per hour for small employers. Then, on Aug. 1, 2016, the rate will increase to $9.50 per hour for large employers and to at least $7.75 per hour for small employers.

Beginning in 2017 and each year after, the Department of Labor and Industry will determine with feedback from stakeholders any appropriate minimum wage increase. The minimum wage increase, if any, will be effective in August of the following year.

For more information on new laws from the 2014 legislative session, see the League’s 2014 Law Summaries (pdf).

For more information on federal overtime laws, see the League’s information memo, Fair Labor Standards Act: An Overview (pdf).

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