Its that time of year again. On Saturday, August 1, 2015, Minnesota’s minimum wage will increase once more to $9 per hour for large employers. Minnesota’s minimum wage statute was changed significantly in 2014 resulting in new definitions of large and small employers, higher and changing minimum wage rates over time, and indexing to inflation. Employers should ensure that they are prepared for the changes to come.
Minnesota’s minimum wage is based on the size of the employer as determined by gross sales, with large employers paying more than small employers. Under the amended 2014 law, a large employer is one that has gross sales of more than $500,000 in annual business. In contrast, a small employer is defined to have gross sales of less than $500,000 in annual business. Prior to the 2014 change, the gross sales amount to be a large employer was $625,000. As a result, more employers are now considered large employers subject to higher minimum wage requirements.
For large employers, the Minnesota minimum wage will increase to $9 per hour on Saturday, August 1, 2015 and then to $9.50 on August 1, 2016. For large employers, these new state rates are significantly higher than the federal minimum wage of $7.25 per hour. For small employers, the August 1, 2015 rate is $7.25 per hour – the same as the federal law rate and will increase to $7.75 on August 1, 2016. Minnesota employees are entitled to receive the highest applicable minimum wage when both the state and federal law apply.
Starting on Jan. 1, 2018, the state minimum wage will include an inflation index that will be used to increase the minimum wage in relation to inflation. The inflationary increase is capped at 2.5 percent per year. The inflation index will not be used to reduce the minimum wage in any year with negative inflation.
Employers should act now to determine if they are large or small employers under the state law changes. Small employers should carefully analyze whether the federal law is applicable. Those employers who have been small employers in the past and will be large employers under the new definition should take steps to adjust rates in a timely manner.