General Publications January 6, 2015

"City, State and Federal Actions on Minimum Wage in 2014," Law360, January 6, 2015.

Extracted from Law360

2014 has been a busy year for proponents of minimum wage increases and their opponents. Those advocating for an increase in statutory minimum wages have been active, with varying degrees of success, at the federal, state and local levels, and their playbook has expanded beyond efforts to affect increases through the legislative process. This article summarizes the minimum wage developments that have occurred during 2014 and then turns an eye toward the path such efforts are likely to take during 2015 and beyond.

Federal Law: Congress' Failure to Increase the Minimum Wage and President Obama's Executive Order on Federal Contractors

Attempts to increase the federal minimum wage under the Fair Labor Standards Act through congressional action met with failure this year. The Fair Minimum Wage Act introduced by Democrats again this year, which would have increased the federal minimum wage to $10.10 per hour by 2016, failed to make it through either house of Congress. And given the results of the November 2014 elections, movement on a federal minimum wage increase is extremely unlikely in 2015 or 2016.

Unable to advance this portion of his employment agenda in Congress, President Obama resorted to his executive powers to mandate an increase in the minimum wages that federal government contractors and subcontractors must pay their workers. On Feb. 12, 2014, in Executive Order 13658, he increased the minimum wage for workers under certain new federal contracts from $7.25 to $10.10 an hour for nontipped workers, and from $2.13 to $4.90 an hour for tipped workers. The U.S. Department of Labor issued final regulations implementing the executive order on Oct. 7, 2014, located at 29 C.F.R. Part 10. The requirements of the executive order and the regulations will apply to new covered contracts entered into on or after Jan. 1, 2015.

State Laws: 14 States and D.C. Increase Their Minimum Wage

Despite — or perhaps in spite of — the lack of movement in Congress on the minimum wage front, 2014 saw significant efforts (and successes) at the state level to increase minimum wage requirements. Thirteen states — Arizona, Colorado, Connecticut, Florida, Missouri, Montana, New Jersey, New York, Ohio, Oregon, Rhode Island, Vermont and Washington — began the year with minimum wage increases that took effect on Jan. 1, 2014, pursuant to laws in place in those states tying the minimum wage to the Consumer Price Index, cost of living or otherwise providing for stepped increases over time.

In addition, during the 2014 legislative session, at least 38 states plus the District of Columbia considered bills to raise their minimum wage. In 11 of those — Connecticut, Delaware, D.C., Hawaii, Maryland, Massachusetts, Michigan, Minnesota, Rhode Island, Vermont and West Virginia — legislation was passed and enacted that will increase the minimum wage in those states at some point, or multiple points, over the next five years.

In five states — Alaska, Arkansas, Illinois, Nebraska and South Dakota — minimum wage ballot measures appeared on ballots in the November general election. The measures in all five states were approved by voters. In Illinois, the voters approved an advisory ballot measure, essentially a question posed to voters asking if the minimum wage should be raised. The other four states’ ballot measures were citizen initiatives that amended the states’ statutes to provide for minimum wage increases effective Jan. 1, 2015.

In light of all of this movement on the minimum wage front in 2014, 22 states and D.C. have minimum wage increases scheduled to take effect on Jan. 1, 2015. Thus, in 2015, 29 states and D.C. will have minimum wages above the current federal minimum wage of $7.25. And the momentum built up by minimum wage proponents in 2014 is likely to continue in 2015, with state legislatures renewing efforts to enact increases. Because 2015 is an off-year for elections (except in a handful of states which may have special or local elections), ballot initiatives are not expected to be a vehicle for attempts at wage reform in 2015, at least at the state level. Given the lack of movement in traditionally conservative states, it will be interesting to see what 2015 holds for those states, especially in light of the minimum wage campaigns (often driven by or linked to union organizing activity) taking place in larger metropolitan cities across the U.S. and garnering considerable media attention.

City Ordinances: Several Large Cities Substantially Increase Their Minimum Wage

In 2014, several cities enacted ordinances to significantly increase the minimum wage. Some commentators suggest that larger metropolitan cities, which often lean to the political left, have a higher cost of living and are more heavily targeted by advocacy groups, are the new frontier for minimum wage reform.

Although not a novel concept — Santa Fe and San Francisco became the first cities to enact minimum wage requirements distinct from their states back in 2003 — this year there was a wave of initiatives to significantly raise the minimum wage in several large U.S. cities. In June, by unanimous vote of the city council, Seattle passed an ordinance raising the minimum wage, in increments, to $15 an hour over a two-to-seven-year period of time, depending on the size of the business. In November, San Francisco voters approved a ballot measure raising the city’s minimum wage — already the highest hourly wage of any U.S. city at $10.74 — in increments, to $15 an hour by mid-2018. Surrounding California cities of Richmond, Berkley and Oakland also enacted increases. In December, by a 44-5 vote of the city council, Chicago set a minimum wage of $13 an hour to be reached in increments by mid-2019.

These local initiatives have not been without challenge. The International Franchise Association, a D.C.-based trade organization, filed suit in federal court arguing that the Seattle ordinance is unconstitutional (in violation of the Equal Protection and Commerce Clauses) because it “unfairly and irrationally discriminates against interstate commerce generally, and small businesses that operate under the franchise business model specifically.” The lawsuit was filed in August and remains pending at the district court level. Additionally, several states have passed laws that forbid cities from enacting their own minimum wage laws. For example, in response to activists’ proposed ballot initiative to raise the minimum wage in Oklahoma City, Oklahoma enacted a law prohibiting its cities from increasing their minimum wage. Rhode Island passed a similar law to prevent a Providence initiative to raise the minimum wage for certain workers in that city.

The power of cities to enact citywide minimum wage laws varies from state to state and, in most states, has not been tested yet. As such, it is too soon to say whether cities are the new frontier for wage reform efforts or a somewhat geographically isolated trend. Either way, grassroots campaigns in cities across the U.S. are expected to continue in 2015.

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