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Massachusetts passed the country’s first minimum wage law in 1912.
An excerpt of the law, which sought to protect women and children, reads, “Where the wages of such a woman are less than the cost of living and the reasonable provision for maintaining the worker in health, the industry employing her is in receipt of the working energy of a human being at less than its cost, and to that extent is parasitic.”
Since then, the federal government and most states and territories have adopted minimum wage laws to protect workers from unfair compensation.
The year is 1938. I imagine that Franklin D. Roosevelt, the U.S. president at the time, is stressed. He has a lot of bills from Congress on his desk, and Congress adjourns in nine days.
On one Saturday in June, Roosevelt signs into law 121 bills, one of which is the Fair Labor Standards Act (FLSA). It’s anyone’s guess how many pens he goes through that day.
The act established the country’s first federal minimum wage at $0.25 per hour, or about $4.63 today, according to Bureau of Labor Statistics data. The FLSA also addressed repressive child labor practices and defined a standard workweek.
Virtually every business operating in the U.S. is subject to FLSA rules on minimum wage, overtime, employment recordkeeping, and child labor. The federal minimum wage is currently $7.25, unchanged since 2009. The standard workweek is 40 hours.
FLSA minimum wage applies to non-exempt employees, who are generally paid hourly. Tipped employees can be paid as low as $2.13 per hour if tips bring their earnings to $7.25 per hour.
The FLSA now acts as a baseline, and states, counties, and cities legislate for higher minimum wages in their jurisdictions.
Your business must pay employees at the highest applicable minimum wage rate. For example, a San Francisco business must pay its employees at least $16.07 per hour, despite a $12 California minimum wage for small businesses.
The minimum wage by state
Twenty-three states and Washington, D.C., have either increased or plan to increase their minimum wage in 2020.
State | 2019 Minimum Wage | 2020 Minimum Wage |
---|---|---|
Alaska | $9.89 | $10.19 |
Arizona | $11 | $12 |
Arkansas | $9.25 | $10 |
California | $11 to $12 | $12 to $13 |
Colorado | $11.10 | $12 |
Connecticut | $11 | $11 ($12 in September 2020) |
District of Columbia | $14 | $15 |
Florida | $8.46 | $8.56 |
Illinois | $8.25 | $10 |
Maine | $11 | $12 |
Maryland | $10.10 | $11 |
Massachusetts | $12 | $12.75 |
Michigan | $9.45 | $9.65 |
Minnesota | $8.04 to $9.86 | $8.15 to $10 |
Missouri | $8.60 | $9.45 |
Montana | $8.50 | $8.65 |
New Jersey | $10 | $11 |
New Mexico | $7.50 | $9 |
New York | $11.10 | $11.80 ($12.50 in December 2020) |
Ohio | $8.55 | $8.70 |
Oregon | $11.25 | $11.50 |
South Dakota | $9.10 | $9.30 |
Vermont | $10.78 | $10.96 |
Washington | $12 | $13.50 |
Five states don’t have minimum wage laws: Alabama, Louisiana, Mississippi, South Carolina, and Tennessee. Employers in no-minimum-wage states must follow the federal minimum wage of $7.25 per hour.
Employers in Georgia and Wyoming -- whose minimum wages are $2.10 below the federal minimum wage at $5.15 -- generally must pay their employees at least $7.25 per hour.
Since FLSA rules apply to nearly all businesses in the U.S., there are few exceptions where a Georgia or Wyoming business could actually pay $5.15 per hour to its employees.
Cities and counties can further legislate to raise minimum wages higher than the state minimum wage. Forty-eight cities and counties in the U.S. have higher minimum wages than their state, according to the Economic Policy Institute.
Emeryville, Calif., is known for having the highest minimum wage in the country, which currently sits at $16.84 per hour. Unsurprisingly, the highest minimum wages in the country are found in cities with high costs of living. Here’s a Tour de Minimum Wage:
Businesses with fewer than 501 employees must pay their non-tipped hourly employees at least $13.50 per hour. If the employer doesn’t pay at least $2.25 per hour toward medical benefits or the employee doesn’t make $2.25 per hour in tips, the minimum wage goes up to $15.75.
The minimum wage for larger businesses in Seattle is $16.39.
The minimum wage in San Francisco and Berkeley, Calif., increases every July 1 based on the Consumer Price Index.
New York City employers must pay their non-tipped hourly employees $15 per hour. Before 2020, employers with fewer than 11 employees were subject to a lower rate than larger employers.
All employers in the country’s capital must pay their non-tipped hourly employees at least $15 per hour. The district’s minimum wage has risen steadily since 2016, when the minimum wage was $11.50.
Small businesses in Los Angeles with fewer than 26 employees and most nonprofits have a $14.25 minimum wage. Businesses with 26 or more employees are subject to a $15 minimum wage.
Tack on $1.25 for employees who aren’t offered health benefits.
Here’s the full list of cities and counties with minimum wages higher than the state minimum:
You should periodically check your state and local labor department websites for changes in their minimum wage and whether certain types of wages, like fringe benefits and other taxable wages, are calculated. Changes most frequently occur at the beginning and middle of each year.
Your accounting software might provide an advantage in staying ahead of these changes. From generating pay stubs to maintaining employee earning records, payroll software can help you stay compliant with some FLSA and state labor laws.
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