Under federal law, employers must pay non-exempt employees a minimum wage of at least $7.25 per hour. However, many jurisdictions have higher minimum wage rates, some of which will increase at the start of 2018. Below, we provide a summary of these changes and guidelines to help you comply with minimum wage requirements as 2018 approaches.

Minimum Wage Changes Effective January 1, 2018

• Albuquerque, NM: $8.95 per hour ($7.95 if the employer provides healthcare and/or childcare benefits to the employee equal to or in excess of $2,500 per year).

• California: For employers with 26 or more employees, $11 per hour. For employers with 25 or fewer employees, $10.50 per hour.
  

o    San Jose, CA: $13.50 per hour. 

o    Oakland, CA: The city adjusts its minimum wage annually for inflation but hasn't yet announced its minimum wage for 2018. An announcement is expected later this month or in early December.

• Minnesota: $9.65 per hour for large employers (annual gross revenue of $500,000 or more) and $7.87 an hour for smaller employers (annual gross revenue of less than $500,000).

o    Minneapolis, MN: For employers with more than 100 employees, $10.00 per hour

• Missouri: The state adjusts its minimum wage annually for inflation but hasn't yet announced its minimum wage for 2018. An announcement is expected later this month.

• New York (effective December 31, 2017):

o    New York City: $13.00 per hour for employers with 11 or more employees and $12.00 per hour for smaller employers; $13.50 per hour for fast food workers in the city

o    Nassau, Suffolk and Westchester Counties: $11.00 per hour

o    Rest of the state: $10.40 per hour

• Washington State: $11.50 per hour

o    Seattle, WA: $14.00 per hour for employers with 500 or fewer employees. Employers can satisfy this requirement through a combination of direct cash wages (of at least $11.50 per hour), tips, and medical benefits. Larger employers must pay employees $15.45 per hour. Employers can satisfy this requirement through a combination of direct cash wages (of at least $15.00 per hour) and medical benefits.

o    Tacoma, WA: $12.00 per hour.

* This list includes minimum wage increases for larger U.S. cities. Several smaller cities also have increases planned for 2018. Check your local minimum wage to ensure compliance.

Multiple Minimum Wages:

If an employee is subject to more than one minimum wage requirement (such as federal, state, and local), you must generally comply with the rate most generous to the employee. For example, if your state minimum wage is $10.00 and the local minimum wage is $11.00, you must generally pay the employee at least $11.00 per hour, since it is higher than the state and federal minimum wage rates. Additionally, if your business is located in one state, but you have employees (such as remote workers) working in another jurisdiction, the minimum wage in the location where the employee performs work generally applies.

Although coverage may vary by jurisdiction, state and local minimum wage laws also typically apply to almost all employers and employees. However, some requirements only apply to businesses of a certain size, or employees who perform a certain number of work hours in that jurisdiction. Check your state and local law for details.

New Minimum Wage Means New Posters in Most Cases:

Most jurisdictions require employers to post a minimum wage notice in the workplace. If you're required to post a notice, make sure it's the most up-to-date version. State and federal posters are available for download in the State & Federal Resources section of HR411^®. ADP clients with the Labor Law Poster Compliance Update Service receive updated posters automatically.

Employees Earning More than the Minimum Wage:

When the minimum wage increases, some employers wonder if they should also provide a raise to employees already earning equal to or more than the new rate. For example, if the minimum wage increases from $9 per hour to $10 per hour, should an employee already earning $10 per hour also get a raise? While the employer is under no obligation to provide a raise, some employees may be expecting one. Consider the potential impact on labor costs, employee morale, internal equity (how employees are paid when compared with other employees within your company), employer brand, and your typical merit increase schedule.

Pay for Nonproductive Work Time:

Under the federal Fair Labor Standards Act (FLSA) and many state laws, employees must be paid for time actually spent working as well as certain nonproductive time, such as rest breaks, travel time, and training time. As long as the rate meets or exceeds the highest applicable minimum wage, you may pay a different wage for nonproductive time than you do for productive time. For example, if the employee's normal wage is $15.00 per hour and the highest applicable minimum wage is $11.50 per hour, you may pay them $11.50 per hour (but not lower) for time spent in training. It is a best practice, and a requirement in certain jurisdictions, to notify the employee in writing of the separate rate before they perform nonproductive work.

Expense Reimbursement:

Throughout the course of their work, employees may incur business expenses for travel and other work-related items. In most cases, under the FLSA, any work-related expense incurred by an employee that would bring his or her pay below the minimum wage (or cut into overtime pay) must be reimbursed. Generally, it is a best practice (and some states expressly require employers) to reimburse all employees for any reasonable business expenses they incur.

Potential Impacts on Overtime Exemptions:

In some states, an increase in the minimum wage can also affect minimum salary requirements for exempt employees. For example, both California and Alaska require employers to pay a salary of at least twice the minimum wage to bona fide administrative, professional, and executive employees. Therefore, in Alaska the minimum salary required for these exemptions under state law will increase to $787.20 per week on January 1, 2018. In California, employers with 26 or more employees must pay a salary of at least $880 per week for these exemptions beginning January 1, 2018. California employers with fewer than 26 employees must pay a minimum salary of at least $840 for these exemptions.

Note: State and federal law require that certain duties tests also be satisfied to qualify for exemption from overtime.