Minimum Wage Increase Effective Jan. 1

The increase will affect all Minnesota employers, including cities, but some people who work for cities may not be covered by the state minimum wage law.
(Published Sep 11, 2017)

Effective Jan. 1, 2018, Minnesota’s minimum wage will increase to $9.65 per hour for large employers (up from $9.50 per hour), and to at least $7.87 per hour for small employers (up from $7.75 per hour). These new rates were announced by the commissioner of the Department of Labor and Industry (DLI) in mid-August.

Under Minnesota law, the DLI commissioner is required to determine and announce the inflation-adjusted minimum-wage rate each year by Aug. 31.

Minnesota’s minimum wage law increased for the first time in nearly a decade in 2014, with phased-in hourly increases on Aug. 1 of each year through 2016, and indexed to inflation based on economic conditions beginning January 2017. The 2018 minimum wage rate increase is linked to a change in the price deflator as an increase of 1.56 percent.

Is your city a large or small employer?
The criteria for determining a large or small employer has not changed from 2014. Large employers in this context means cities with a total budget greater than $500,000. How do you figure out what your total budget includes? Basically, include all city operations, so enterprise funds such as water/sewer operations and municipal liquor stores must be included in this calculation of your city’s total budget.

However, the DLI states that, for purposes of determining city status as a large employer or small employer under Minnesota’s minimum wage law, a city need not include revenue from legally separate public entities. These legally separate entities are limited to economic development authorities, housing and redevelopment authorities, municipal power or gas agencies, and other special taxing districts created and organized under Minnesota law.

Youth wage $7.87
As of Jan. 1, 2018, both large and small employers must pay employees under age 18 at least $7.87 per hour (an increase from $7.75). Since small employers must pay at least $7.87 per hour to all employees already, the youth wage rate does not allow small employers to pay employers under the age of 18 less than that $7.87 minimum.

Ninety-day training wage is $7.87
The “training wage,” as of Jan. 1, 2018, allows large employers to choose to pay employees under age 20 a “90-day training wage” of at least $7.87 per hour, but only for the first 90 consecutive days of employment. Importantly, once the 90-day period is up, large employers must increase those wages to $9.65 per hour.

Since small employers must pay at least $7.87 per hour to all employees, this 90-day training wage does not allow small employers to pay employers under the age of 20 less than that $7.87 minimum.

State and federal law apply
Remember, there are both state and federal minimum wage laws to consider for a position. As of August 2017, the federal minimum wage remains at $7.25 per hour. If both state and federal minimum wage laws apply to a particular employee, that employee is entitled to the higher of the two minimum wages.

In most cases for Minnesota cities in 2018, the state minimum wage rate will be higher than the federal minimum wage since state minimum wages will be $9.65 per hour for large employers and $7.87 for small employers.

Who is not covered by minimum wage law?
Check for specific legal advice to ensure a particular employee is paid according to state and federal minimum wage law. Generally speaking, state minimum wage laws do not apply to the following people, but federal laws may still apply:

  • Elected officials.
  • Individuals who serve on any governmental board, commission, committee, or other similar body.
  • City volunteers.
  • Any individual employed, directly or indirectly, by the city to provide police or fire protection services.
  • Those whose annual salary from one governmental subdivision never exceeds $5,100 stipulated in writing in advance.
  • Student interns, as defined in the law (Minnesota Statutes, section 353.01, subdivision 2b (a) (9) (i)).
  • Any individual under 18, working less than 20 hours per workweek for a municipality as part of a recreational program.

Learn more from the League’s HR Reference Manual, Chapter 1 (pdf)

If you have questions about minimum wage laws, contact the League’s Human Resources Department at hrbenefits@lmc.org, (651) 281-1200, or (800) 925-1122.

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