THE BATTLE FOR THE $15 MINIMUM WAGE
On January 26, 2021, Democrats in the U.S. House reintroduced the Raise the Wage Act, H.R. 601 (the “Act”), a bill to amend the Fair Labor Standards Act to gradually lift the federal minimum wage to $15 per hour.
So, what does this mean if it passes into law?
Here are the details:
If passed, the minimum wage would increase to $15 by 2025, beginning with an increase to $9.50 in 2021 and annual increases thereafter; the minimum wage would be indexed to median wage growth after 2025; and the FLSA’s relaxed wage thresholds for tipped employees, youth workers, and certain other workers would be gradually eliminated.
The following table provides an overview of the scheduled minimum wage increases under the Raise the Wage Act, beginning with current minimum wage thresholds and continuing through 2027.
|Year||Standard Minimum Wage||Tipped Employees||Youth Employees*||14c Employees**|
|2026||Indexed to Median Wages||$14.95||$14.75||Standard Minimum Wage|
|2027||Indexed to Median Wages||Standard Minimum Wage||Standard Minimum Wage||Standard Minimum Wage|
*The FLSA allows employers to pay employees under 20 years old a sub-minimum wage during the first 90 calendar days of their employment.
**Section 14(c) of the FLSA authorizes employers, after receiving a certificate from the U.S. DOL’s Wage and Hour Division, to pay subminimum wages to workers with disabilities that impair their earning or productive capacity for the work being performed.
Significant Impact on Restaurants
Currently, the FLSA allows employers to pay tipped employees a direct wage of $2.13 per hour, with the remaining portion of minimum wage – i.e., $5.12 per hour can be paid through tips. Tipped employees are still guaranteed at least $7.25 per hour, the only difference is that it may be paid in the form of tips.
The Act would eliminate this “tip credit”. Restaurants would be required to directly pay tipped employees the full minimum wage, regardless of the tips they receive. Restaurants accustomed to paying tipped workers a direct wage of $2.13 would have to find a way to pay them more than double that amount in 2021, and more than seven times that amount by 2026. In a restaurant industry that has spent most of the last year on life support, this change has been met with heavy resistance.
But will it pass?
I don’t have a magic eight ball, but signs point to this Act failing in the Senate. Democrats are going to run into the problems surrounding the political dynamics in the Senate which will preclude passage through normal legislative mechanisms. As a result, Democrats would still have to press such a hike without any Republican support, through either reconciliation, or by doing away with the filibuster, which is not likely.
Here is why we need to keep an eye on this topic. The Biden Administration can and will press the policy behind a federal minimum wage increase through federal employment agencies such as the Department of Labor. Employers should be prepared for enhanced movement from the DOL’s Wage and Hour Division.
We will be sure to keep an eye on the changes a new administration will bring to employers, including this one. Be on the lookout for updates from your team at HR Affiliates!