Be a Seed for Change

December 28, 2016

On June 2, 2014 the Seattle City Council voted to implement a city ordinance to increase the minimum wage. The ordinance gives employees in Seattle, a 61 percent wage increase. A rule-making process with stakeholders began in October 2014. Final rules were released in late March 2015.

We are working to ensure our member restaurants have support navigating the new $15 minimum wage. We continue to evaluate its impacts, but there is evidence the business model is evolving in Seattle to address the new minimum wage and other ordinances within the city. You can read the FAQ about the Seattle minimum wage ordinance provided by the Seattle Department of Labor Standards here.

Employees are our greatest asset and we are committed to complying with the law while seeking to balance equality for our employees who work in the dining room and the kitchen.

Large/Small Employer Timetables (click images to enlarge)

UW Study

From 2015 to 2016, the University of Washington was hired to do a study of impacts the increased wage had on the city. According to the report, Seattle businesses made these changes:

62% raised prices on goods/services,
30% added service charges or fees,
30% reduced their number of employees, and
11% left Seattle.

Service Charges

Implementing services charges is one solution many businesses have considered. If you are considering a service charge please read our HERO manual page 35-37. These two pages offer in-depth answers to tricky questions and what the legal requirements are regarding service charges. The HERO manual is a free membership benefit. You can also read our article and FAQ on service charges (with examples).

How some restaurants in Washington are handling service charges:

– Maximilien Service Charge Webpost

– Tom Douglas Service Charge Model Letter (PDF)

– Ivar’s Explanation of Cost Increase and Tipping Changes

– Iron Rabbit goes Tipless and Institutes a Service Charge (article)

Past e-edition articles:

1. Tips

2. Schedule 1 or Schedule 2 employers

3. Service Charges

4. Posting Requirements

5. More on Tips

6. Other Compensation: Health Care

7. Other Compensation: Commissions & Bonuses

8. Crash Course

Resources:

– Minimum Wage Guide

– Exhibit 1 – Seattle wage law poster (English, Spanish, Amharic)

– Exhibit 2 – Sample letter to employees at time of hire

– Exhibit 3 – Sample letter to current employees

– Exhibit 4 – Schedule 1 (large) employers wage payment chart

– Exhibit 5 – Schedule 2 (small) employers wage payment chart

– Exhibit 6 – State overtime guide

Authors: Benjamin A. Anchill (Detroit Metro), Margaret Carroll Alli (Detroit Metro)

Published Date: December 21, 2016

Effective January 1, 2017, 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 continue to have, as it did last year, one of the highest minimum wage rates in the country at $11.50 per hour until July 1, 2017, and $12.50 per hour after that date. With respect to state minimum wages, Massachusetts and Washington will have the highest minimum wages at $11.00 per hour effective January 1, 2017, with California close behind at $10.50 per hour (for employers with 26 or more employees), effective January 1, 2017, and Connecticut following at $10.10 per hour, effective January 1, 2017.

The states with the lowest minimum wages continue to be Georgia and Wyoming, both of which 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, 22 (or slightly less than one-half of them) will increase their minimum wage rates from 2016 to 2017 (up from 17 states—or just over one-third—that increased their minimum wage rates from 2015 to 2016).

The 2017 Minimum Wage

The chart below lists the minimum wage rates that will be in effect for 2017 in all 50 states and the District of Columbia and also reflects changes in state laws from 2016 to 2017. Importantly, all employers covered under the Fair Labor Standards Act (FLSA) will still be required to meet the applicable FLSA minimum hourly rate, which remains at $7.25 per hour, even if a particular state’s law allows for a lower minimum wage rate. Thus, states with minimum wage rates that are lower than $7.25 per hour must pay employees at least $7.25 per hour.

The 2017 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.

All FLSA-covered employers may apply a tip credit that, generally, should be no greater than the FLSA’s maximum tip credit, which is currently set at $5.12 per hour. Employers in states with maximum tip credits that are higher than the federal maximum tip credit may be able to apply the higher tip credit only if the difference between the state minimum wage and the tip credit is at least $2.13. A more conservative approach, however, would be to adopt the lower federal maximum tip credit 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 the payment of tip credits in their entirety) may continue to follow the more employee-friendly state law.

JURISDICTION	2017 MINIMUM WAGE	2017 MAXIMUM TIP CREDIT ALLOWED	CHANGE FROM 2016
Federal	$7.25	$5.12	No change
Alabama	No specific minimum wage rate under state law; the $7.25 federal minimum wage rate applies	No specific tip credit minimum under state law; the federal $5.12 maximum tip credit applies	No change
Alaska	$9.80, effective January 1, 2017	$0.00; no tip credit allowed under state law	Increase
Arizona	$10.00, effective January 1, 2017	$3.00	Increase
Arkansas	$8.50, effective January 1, 2017	Employers should apply the maximum $5.12 federal tip credit, even though the state maximum tip credit is higher at $5.87.	Increase
California	$10.00 for employers with fewer than 26 employees, effective January 1, 2017	$0.00; no tip credit allowed under state law	Increase for employees who work for employers with 26 or more employees
California	$10.50 for employers with 26 or more employees, effective January 1, 2017	$0.00; no tip credit allowed under state law
Colorado	$9.30, effective January 1, 2017	$3.02	Increase
Connecticut	$10.10, effective January 1, 2017	$3.72 (waitpersons); $1.87 (bartenders), effective January 1, 2017	Increase
Delaware	$8.25	Employers should apply the maximum $5.12 federal tip credit, even though the state maximum tip credit is higher at $6.02.	No change
District of Columbia	$11.50 until July 1, 2017, then $12.50	Employers should apply the maximum $5.12 federal tip credit, even though the state-imposed maximum tip credit is higher at $8.73 until July 1, 2017, and will then be $9.17.	Increase
Florida	$8.10, effective January 1, 2017	$3.02	Increase
Georgia	The $7.25 federal minimum wage rate applies because the state minimum wage rate is lower at $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	$9.25, effective January 1, 2017	$0.75	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; the $7.25 federal minimum wage rate applies	No specific tip credit minimum under state law; the federal $5.12 maximum tip credit applies	No change
Maine	$9.00, effective January 1, 2017	$4.00, effective January 1, 2017	Increase
Maryland	$8.75 until July 1, 2017, then $9.25	$5.12 until July 1, 2017, then $5.62, at which time employers should apply the maximum $5.12 federal tip credit, even though the state-imposed maximum tip credit effective after July 1, 2017 is higher	Increase
Massachusetts	$11.00, effective January 1, 2017	Employers should apply the maximum $5.12 federal tip credit, even though the state-imposed maximum tip credit is higher at $7.75, effective January 1, 2017.	Increase
Michigan	$8.90, effective January 1, 2017	Employers should apply the maximum $5.12 federal tip credit, even though the state-imposed maximum tip credit is higher at $5.52, effective January 1, 2017.	Increase
Minnesota	$9.50 for employers with gross sales of $500,000 or more	$0.00; no tip credit allowed under state law	No change
Minnesota	$7.75 for employers with gross sales less than $500,000	$0.00; no tip credit allowed under state law	No change
Mississippi	No specific minimum wage rate under state law; the $7.25 federal minimum wage rate applies	No specific tip credit minimum under state law; the federal $5.12 maximum tip credit applies	No change
Missouri	$7.70, effective January 1, 2017	$3.85	Increase
Montana	$8.15, if the employer’s annual sales are more than $110,000, effective January 1, 2017; otherwise the $7.25 federal minimum wage rate applies because the state minimum wage rate for other businesses is lower at $4.00	$0.00; no tip credit allowed under state law	Increase
Nebraska	$9.00	Employers should apply the maximum $5.12 federal tip credit, even though the state-imposed maximum tip credit is higher at $6.87.	No change
Nevada	$7.25 if the employee receives health benefits provided by the employer	$0.00; no tip credit allowed under state law	No change
Nevada	$8.25 if the employee does not receive health benefits provided by the employer	$0.00; no tip credit allowed under state law	No change
New Hampshire	$7.25	$3.99	No change
New Jersey	$8.44, effective January 1, 2017	Total wages and tips must equal at least the minimum wage.	Increase
New Mexico	$7.50	Employers should apply the maximum $5.12 federal tip credit, even though the state-imposed maximum tip credit is higher at $5.37.	No change
New York	New York City’s (NYC) Large Employers (11 or more employees): $11.00 ($12.00 for fast food workers), effective December 31, 2016	NYC’s Large Employers: $1.85 for service employees, $3.50 for food service workers, and $0.00 for fast food workers, effective December 31, 2016	Increase
	NYC’s Small Employers (10 or fewer employees): $10.50 ($12.00 for fast food workers), effective December 31, 2016	NYC’s Small Employers: $1.75 for service employees, $3.00 for food service workers, and $0.00 for fast food workers, effective December 31, 2016
	Long Island and Westchester: $10.00 ($10.75 for fast food workers), effective December 31, 2016	Long Island and Westchester: $1.65 for service workers, $2.50 for food service workers, and $0.00 for fast food workers, effective December 31, 2016
	Remainder of New York: $9.70 ($10.75 for fast food workers), effective December 31, 2016	Remainder of New York: $1.60 for service employees, $2.20 for food service workers, $0.00 for fast food workers, effective December 31, 2016
North Carolina	$7.25	$5.12	No change
North Dakota	$7.25	$2.39	No change
Ohio	$8.15, if the employer’s annual gross receipts are more than $297,000, effective January 1, 2017; otherwise $7.25	$4.07	Increase
Oklahoma	$7.25; the federal minimum wage rate applies because the state minimum wage is lower at $2.00 for employers with 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	$9.75 until June 30, 2017, then $10.25	$0.00; no tip credit allowed under state law	Increase
Pennsylvania	$7.25	$4.42	No change
Rhode Island	$9.60	Employers should apply the maximum $5.12 federal tip credit, even though the state-imposed maximum tip credit is higher at $5.71, effective January 1, 2017.	No change
South Carolina	No specific minimum wage rate under state law; the $7.25 federal minimum wage rate applies	No specific tip credit minimum under state law; the federal $5.12 maximum tip credit applies	No change
South Dakota	$8.65, effective January 1, 2017	$4.325	Increase
Tennessee	No specific minimum wage rate under state law; the $7.25 federal minimum wage rate applies	No specific tip credit minimum under state law; the federal $5.12 maximum tip credit applies	No change
Texas	$7.25	$5.12	No change
Utah	$7.25	$5.12	No change
Vermont	$10.00, effective January 1, 2017	$5.00	Increase
Virginia	$7.25	Employers should apply the maximum $5.12 federal tip credit, even though 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	$11.00, effective January 1, 2017	$0.00; no tip credit allowed under state law	Increase
West Virginia	$8.75	Employers should apply the maximum $5.12 federal tip credit, even though the state-imposed maximum tip credit is higher at $6.13.	No change
Wisconsin	$7.25	$4.92	No change
Wyoming	The $7.25 federal minimum wage rate applies because the state minimum wage rate is lower at $5.15.	$3.02	No change

Employers may also want to be careful to take into account applicable local laws that set a higher minimum wage in certain cities or localities than the minimum wage generally applicable in the state. By way of example, the following big cities or localities currently impose minimum wages that are higher than the statewide minimum wage of the state in which they are located: New York City; Long Island and Westchester, New York; Los Angeles, San Diego, and San Francisco, California (among numerous other cities in California); Chicago and Cook County, Illinois; Montgomery and Prince George’s Counties, Maryland; Portland, Maine; Albuquerque and Santa Fe, New Mexico; and Seattle, SeaTac, and Tacoma, Washington. It is expected that this list will continue to grow in 2017.