City of Minneapolis Set to Adopt Minimum Wage Ordinance

The Minneapolis City Council is set to adopt a $15 minimum wage ordinance on Friday, June 30, 2017.

The ordinance was updated after the City held hearings on June 22 and 28. The current draft contains the following provisions, most of which remain unchanged:

  • A schedule of minimum wage increases that differs for “large” and “small” businesses.
  • Extraterritorial application, meaning that employees who may not be based in Minneapolis but perform work within the geographic boundaries of the City are covered in relation to that work (there is a 2-hour per week requirement to hit the coverage threshold).
  • No tip credit, despite voluminous and vociferous pleas from many in the business community.
  • A very limited, short-lived training wage (90 days, 85% the rate of the minimum wage) for workers under 20 who work in a city-approved training or apprenticeship program.

As noted above, the schedule for the wage increases depends on whether an employer is classified as a “large” or “small” business. An employer is a “large business” if it:

  • Employs more than 100 employees; or
  • Operates more than two locations in the City and more than 10 locations in the state, regardless of the number of employees at each location in the City.

A “small business” includes:

  • Businesses that employ 100 or fewer employees;
  • Non-hospital residential health care facilities, including, but not limited to, nursing care facilities, home health care facilities, assisted living facilities, and residential disability facilities, that rely on Medicare or Medicaid reimbursement rates; or
  • Ex-offender transition or employment programs.

For large businesses, the proposed wage increase schedule is as follows:

Effective Date Hourly Minimum Wage
January 1, 2018 $10.00
July 1, 2018 $11.25
July 1, 2019 $12.25
July 1, 2020 $13.25
July 1, 2021 $14.25
July 1, 2022 $15.00

 

For small businesses, the proposed wage increase schedule is as follows:

Effective Date Hourly Minimum Wage
July 1, 2018 $10.25
July 1, 2019 $11.00
July 1, 2020 $11.75
July 1, 2021 $12.50
July 1, 2022 $13.50
July 1, 2023 $14.50
July 1, 2024 $15.00 plus an inflationary figure determined by a process outlined in the ordinance

 

Starting in September 2022 for large businesses, the City will determine the new minimum wage rate in a manner that is tied to inflation. The new rates will be announced on September 1 of each year, and they will take effect on January 1 of the following year. Starting on July 1, 2024, the adjusted minimum wage rate for large businesses will apply to all businesses.

Interestingly, the new law will not apply to employees who are classified as exempt under the Minnesota Fair Labor Standards Act. However, this likely will not result in a significant impact, as these employees are almost certainly being paid more than the minimum wage now (in order to be classified as exempt) and many will probably still be earning more even when the rate hits $15 per hour.

The new law will also impose new notice, posting, recordkeeping, and anti-retaliation obligations with which employers must comply.

Finally, the law allows a private right of action, and a successful plaintiff will be entitled to his or her attorneys’ fees.

While we fully expect a legal challenge to the extraterritorial application portion of the ordinance, employers based in Minneapolis or employers who regularly send employees into the City to work should start planning to comply with the new ordinance, as large businesses must come into compliance in just over six months and any potential litigation is unlikely to resolve that quickly. Employers who send employees into the City must also consider adopting mechanisms to track hours worked and to potentially pay employees different wage rates for their work, the latter of which will likely impact overtime rates for affected employees.

For compliance questions, please contact Lisa Schmid at 612.305.7549 or lschmid@nilanjohnson.com.

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