Nearly all MN employers covered by federal wage hike

There’s a lingering perception that businesses with sales below $500,000 a year are automatically off the hook from the new federal minimum wage hike. Not true.

The reality is that almost all Minnesota employers will need to pay their employees no less than $7.25 per hour, a big jump from the current state minimum wage of $6.15 per hour for large firms or $5.25 per hour for small ones.

We’ve been talking about this recently with Mary Krakow, an attorney and employment law expert with the Fredrikson & Byron law firm in Minneapolis. She says she’s seen reports erroneously indicating firms grossing less than $500,000 a year are exempt on the wage hike.

The takeaway is that the law is not just about the $500,000 cutoff.

You can fall below that and still have to pay the higher federal rate if your employees, “produce goods for commerce or handle, sell or otherwise work on goods or materials that have been moved in or produced for commerce,” says Krakow, who wrote a piece on the wage change she’ll post soon on her Fredrikson & Byron page.

The law, she says:

…broadly defines “commerce” to include any trade, commerce, transportation, transmission, or communication among or between any of the states and sometimes even when the activity is only within one state.

This rule means that even if the employee’s employer (doesn’t meet the $500,000 threshold), the federal minimum wage still applies to the employee.

…because the (law) broadly defines “commerce,” it is the rare employee who does not somehow assist in the production of goods for commerce.

In Minnesota, employers also can’t use tip credit to meet the minimum wage.

Many businesses pay more than minimum wage, of course. The Economic Policy Institute, a liberal research group, estimates the law will affect 79,000 Minnesotans directly and 44,000 indirectly. That’s less than 5 percent of the 2.6 million Minnesotans employed currently.

The point is that it affects a lot more businesses than you realize and, whether you support the wage hike or not, some small businesses are going to need to find a way in this recession to pay their minimum wage workers a lot more.

Some of the more unusual exemptions to the law Krakow notes:

  • some employees in amusement or recreational establishments
  • certain agricultural employees
  • some employees of newspapers with small circulation

Check out my prior post where I put up a couple of interesting regional and national comparisons of Minnesota and other states on the minimum wage.

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