New Federal Minimum Wage Takes Effect Tomorrow

Don’t forget that the federal minimum wage will increase from $5.15 to $5.85 per hour, effective tomorrow (July 24, 2007).  The increase will have little impact on most employers, however, considering that more than half of the states and the District of Columbia have established minimum wage rates that exceed the new federal rate.  Employers that are subject to the new federal minimum wage should ensure that their payroll records reflect the change and that the proper posters are in place. 

The Fair Minimum Wage Act of 2007, which was signed into law by President Bush in late May, amended the Fair Labor Standards Act (FLSA) to increase the federal minimum wage from $5.15 to $7.25 per hour over three years.  The Act raises the federal minimum wage in three steps: from $5.15 to $5.85 per hour tomorrow, to $6.55 per hour on July 24, 2008, and to $7.25 per hour on July 24, 2009.

Employers should note that the tip credit increases as well, effective July 24.  The federal minimum wage increase did not address, and hence did not change, the wage an employer is required to pay a tipped employee under Section 3(m) of the FLSA.  Thus, the FLSA requires employers to pay a cash wage of $2.13 per hour to take advantage of the tip credit and the tip credit that an employer can claim increases from the current $3.02 per hour to $3.72 per hour tomorrow.  The law remains unchanged such that if the employer’s cash wage of $2.13 per hour plus the employee’s tips do not equal $5.85, then the employer is required to pay the difference.

A revised federal minimum wage poster that reflects the recently enacted minimum wage increases is now available here.  Any employer that has employees subject to the FLSA’s minimum wage provisions is required to post a notice explaining the statute’s protections.  The poster must be in a conspicuous place in the employer’s establishments so as to enable employees to read it.  The Wage and Hour Division plans to provide additional posters and compliance assistance materials.

To determine whether your company is subject to the new federal minimum wage or a higher state rate, visit the DOL’s Web site.  Should you have any additional questions, please contact the Ogletree Deakins attorney with whom you normally work or the Client Services Department at 866-287-2576 or via email at clientservices@ogletreedeakins.com.  

Note: This article was published in the July 23, 2007 issue of the National eAuthority.