Effective January 1, 2016, 29 states plus the District of Columbia will have minimum wage rates that are above the federal minimum wage rate of $7.25 per hour. The District of Columbia will have, by far, one of the highest minimum wage rates in the country at $10.50 per hour until July 1, 2016, and $11.50 per hour after that date. With respect to state minimum wages, California and Massachusetts are next at $10 per hour effective January 1, 2016. The states with the lowest minimum wages are Georgia and Wyoming, which both have rates of $5.15 per hour, along with Oklahoma, which allows employers that have fewer than 10 full-time employees and $100,000 or less in gross annual sales to pay $2.00 per hour to employees. Five states—Alabama, Louisiana, Mississippi, South Carolina, and Tennessee—have not enacted minimum wage laws. Of the 45 states plus the District of Columbia that have enacted minimum wage laws, 17—or just over one-third—will increase their minimum wage rates from 2015 to 2016.
The 2016 Minimum Wage
The chart below lists the minimum wage rates that will be in effect for 2016 in all 50 states and the District of Columbia and also reflects changes in state laws from 2015 to 2016. Importantly, all employers covered under the Fair Labor Standards Act (FLSA) will still be required to meet the applicable FLSA minimum hourly rate, which is currently $7.25 per hour, even if a particular state’s minimum wage rate is lower than the federal minimum wage rate. Thus, FLSA-covered employers in states with minimum wage rates that are lower than $7.25 per hour must pay employees at least $7.25 per hour. Employers should also check local ordinances that may impose a higher minimum wage rate for particular cities.
The 2016 Maximum Tip Credit
The chart also breaks down the maximum tip credit that employers can count against the hourly rates of tipped employees. The tip credit is the portion of the cash minimum wage that employers are not required to pay to employees who receive tips. The minimum wage less the applicable tip credit is the lowest wage per hour that an employer must pay its tipped employees.
Under the FLSA, the maximum tip credit is $5.12 per hour. Generally, FLSA-covered employers in states with maximum tip credits that are higher than the federal maximum tip credit of $5.12 may be able to apply the higher state tip credit only if the difference between the state minimum wage and the state tip credit is at least $2.13. A more conservative approach, however, would be to adopt the lower federal maximum tip credit of $5.12 since it is more advantageous to employees. Employers in states that have enacted a tip credit that is lower than the federal maximum tip credit of $5.12 per hour (including states that have prohibited tip credits in their entirety) may continue to follow the more employee-friendly state law. Given the nuances in state law, employers should seek individualized legal advice before applying maximum tip credits under state law that are higher than the FLSA maximum tip credit of $5.12 per hour.
|
JURISDICTION |
2016 MINIMUM WAGE |
2016 MAXIMUM TIP CREDIT |
CHANGE FROM 2015 |
|
Federal |
$7.25 |
$5.12 |
No change |
|
Alabama |
No specific minimum wage rate under state law. |
No maximum tip credit under state law. |
N/A |
|
Alaska |
$9.75, effective January 1, 2016 |
$0.00; A tip credit is not allowed under state law. |
Increase |
|
Arizona |
$8.05 |
$3.00 |
No change |
|
Arkansas |
$8.00, effective January 1, 2016 |
$5.37 |
Increase |
|
California |
$10.00, effective January 1, 2016 |
$0.00; A tip credit is not allowed under state law. |
Increase |
|
Colorado |
$8.31, effective January 1, 2016 |
$3.02 |
Increase |
|
Connecticut |
$9.60, effective January 1, 2016 |
$3.53 (waitpersons); $1.78 (bartenders), effective January 1, 2016 |
Increase |
|
Delaware |
$8.25 |
$6.02. |
No change |
|
District of Columbia |
$10.50 until July 1, 2016, then $11.50 |
$7.73 until July 1, 2016 when the tip credit increases to $8.73. |
Increase |
|
Florida |
$8.05 |
$3.02 |
No change |
|
Georgia |
$5.15 for employers with six or more employees and annual sales of more than $40,000 |
Tipped employees are not subject to the state minimum wage rate. |
No change |
|
Hawaii |
8.50, effective January 1, 2016 |
$0.75, effective January 1, 2016 |
Increase |
|
Idaho |
$7.25 |
$3.90 |
No change |
|
Illinois |
$8.25 |
$3.30 |
No change |
|
Indiana |
$7.25 |
$5.12 |
No change |
|
Iowa |
$7.25 |
$2.90 |
No change |
|
Kansas |
$7.25 |
$5.12 |
No change |
|
Kentucky |
$7.25 |
$5.12 |
No change |
|
Louisiana |
No specific minimum wage rate under state law. |
No maximum tip credit under state law. |
N/A |
|
Maine |
$7.50 |
$3.75 |
No change |
|
Maryland |
$8.25 until July 1, 2016, then $8.75 |
$4.62 until July 1, 2016, then $5.12 |
Increase |
|
Massachusetts |
$10.00, effective January 1, 2016 |
$6.65, effective January 1, 2016. |
Increase |
|
Michigan |
$8.50, effective January 1, 2016 |
$5.27, effective January 1, 2016. |
Increase |
|
Minnesota
|
$9.00 until August 1, 2016, then $9.50 (for “large employers”) |
$0.00; A tip credit is not allowed under state law. |
Increase
|
|
$7.25 until August 1, 2016, then $7.75 (for “small employers”) |
|||
|
Mississippi |
No specific minimum wage rate under state law. |
No maximum tip credit under state law. |
N/A |
|
Missouri |
$7.65 |
$3.825 |
No change |
|
Montana |
$8.05 (if employer’s annual gross sales are more than $110,000), otherwise $4.00 |
$0.00; A tip credit is not allowed under state law. |
No change |
|
Nebraska |
$9.00, effective January 1, 2016 |
$6.87, effective January 1, 2016. |
Increase |
|
Nevada
|
$7.25 if the employee receives health benefits provided by the employer |
$0.00; A tip credit is not allowed under state law.
|
No change
|
|
$8.25 if the employee does not receive health benefits provided by the employer |
|||
|
New Hampshire |
$7.25 |
$3.99 |
No change |
|
New Jersey |
$8.38 |
Total wages and tips must equal at least the minimum wage |
No change |
|
New Mexico |
$7.50 |
$5.37. |
No change |
|
New York |
$9.00, but $10.50 for fast food workers in NYC and $9.75 for fast food workers in the rest of the state, effective December 31, 2015 |
$1.50, effective December 31, 2015 |
Increase |
|
North Carolina |
$7.25 |
$5.12 |
No change |
|
North Dakota |
$7.25 |
$2.39 |
No change |
|
Ohio |
$8.10 if employer’s annual gross receipts are more than $297,000, otherwise $7.25 |
$4.05 |
No change |
|
Oklahoma |
$7.25 ($2.00 if the employer has fewer than 10 full-time employees with gross annual sales of $100,000 or less). |
$3.625 ($1.00 if the employer has fewer than 10 full-time employees with gross annual sales of $100,000 or less) |
No change |
|
Oregon |
$9.25 |
$0.00; A tip credit is not allowed under state law. |
No change |
|
Pennsylvania |
$7.25 |
$4.42 |
No change |
|
Rhode Island |
$9.60, effective January 1, 2016 |
$6.21. |
Increase |
|
South Carolina |
No specific minimum wage rate under state law. |
No maximum tip credit under state law. |
N/A |
|
South Dakota |
$8.55, effective January 1, 2016 |
$4.28 |
Increase |
|
Tennessee |
No specific minimum wage rate under state law. |
No maximum tip credit under state law. |
N/A |
|
Texas |
$7.25 |
$5.12 |
No change |
|
Utah |
$7.25 |
$5.12 |
No change |
|
Vermont |
$9.60, effective January 1, 2016 |
$4.80 |
Increase |
|
Virginia |
$7.25 |
Employers are not required to pay tipped employees a cash wage unless the employee demonstrates that tips do not equal at least the minimum wage |
No change |
|
Washington |
$9.47 |
$0.00; no tip credit allowed under state law. |
No change |
|
West Virginia |
$8.75, effective January 1, 2016 |
$6.13 |
Increase |
|
Wisconsin |
$7.25 |
$4.92 |
No change |
|
Wyoming |
$5.15 |
$3.02 |
No change |
Employers should also be careful to take into account the applicable local laws, including local living wage ordinances (such as San Francisco’s, which increases to $15.00 per hour by 2018) and city minimum wage ordinances (such as Emeryville, California’s, which is scheduled to reach $16.00 per hour by 2020). These local laws may impose higher minimum wage rates than either the federal rate or the applicable state minimum wage rate.
State wage and hour topics, including state and major municipal minimum wages, are summarized in the firm’s O-D Comply: State Wage & Hour Issues subscription materials, which are updated and provided to O-D Comply subscribers as the law changes.
