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Breaking Down the Minimum Wage Bill

By Sima Fried

Last week, the Maryland Senate and House of Delegates voted to override Governor Hogan’s veto of this session’s Maryland minimum wage bill. As you’ve probably heard, the legislature’s “Fight for Fifteen” bills increase the State minimum wage to $15.00 per hour. The bill becomes effective June 1, 2019. Here’s what you need to know.

Minimum Wage

The last time the Maryland Legislature voted on the minimum wage was 5 years ago. Under the 2014 bills, the minimum wage increased to $10.10 effective this past July. This year’s bill increases the State minimum wage year by year until it reaches $15.00. Based on the size of the employer, however, the increases are different.

For employers with 15 or more employees, the following schedule of minimum wage increases will apply:

  • $11.00 on January 1, 2020
  • $11.75 on January 1, 2021
  • $12.50 on January 1, 2022
  • $13.25 on January 1, 2023
  • $14.00 on January 1, 2024, and
  • $15.00 on January 1, 2025

And for “small employers” – employers with 14 or fewer employees, the following alternate schedule of minimum wage increases will apply:

  • $11.00 on January 1, 2020
  • $11.60 on January 1, 2021
  • $12.20 on January 1, 2022
  • $12.80 on January 1, 2023
  • $13.40 on January 1, 2024
  • $14.00 on January 1, 2025
  • $14.60 on January 1, 2026, and
  • $15.00 on July 1, 2026

For employees who are under 18 years old, the bill permits an employer to pay such employees a wage equal to 85% of the then-current State minimum wage.

Tipped Employees
The version of the bill that passed left the provisions for tipped employees more or less unchanged. Employers of employees who regularly receive more than $30 each month in tips may still pay those employees as little as $3.63 per hour in base pay. As always, the average base pay and tips combined must equal or exceed the State minimum wage (in place at the time) for each hour worked during a workweek; and if they do not, the employer still must make up the difference to ensure each employee earns minimum wage.

The bill does add one new requirement for employers with tipped employees. Starting June 1, 2019, restaurant employers that include a tip credit as part of the wage must provide all tipped employees with a written or electronic wage statement for each pay period showing the effective hourly tip rate (as derived from employer-paid cash wages plus all reported tips) for tip credit hours worked each workweek of the pay period. The bill directs the Commissioner of Labor and Industry – in consultation with payroll service providers and restaurant industry trade group representatives – to adopt regulations governing this new employer requirement.

Employer Overtime for Tipped Employees
As always, any change to the minimum wage does change the employer tip credit for tipped employees and affects the calculation of overtime pay. The tip credit for the current $10.10 minimum wage is $6.47 ($10.10–$3.63). Thus the required employer-paid wage for overtime hours currently equals $8.68 ($15.15–$6.47).

For employers with 15 or more employees, the tip credit and employer-paid overtime wages will change as follows under each successive minimum wage increase:

Effective Date Tip Credit Overtime Minimum Wage Employer
Overtime Pay
Jan. 1, 2020 $7.37 $16.50 $9.13
Jan. 1, 2021 $8.12 $17.625 $9.505
Jan. 1, 2022 $8.87 $18.75 $9.88
Jan. 1, 2023 $9.62 $19.875 $10.225
Jan. 1, 2024 $10.37 $21.00 $10.63
Jan. 1, 2025 $11.37 $22.50 $11.13

 

And for employers with 14 or fewer employees, the tip credit and employer-paid overtime wages will change as follows:

Effective Date Tip Credit Overtime Minimum Wage Employer
Overtime Pay
Jan. 1, 2020 $7.37 $16.50 $9.13
Jan. 1, 2021 $7.97 $17.40 $9.43
Jan. 1, 2022 $8.57 $18.30 $9.73
Jan. 1, 2023 $9.17 $19.20 $10.03
Jan. 1, 2024 $9.77 $20.10 $10.33
Jan. 1, 2025 $10.37 $21.00 $10.63
Jan. 1, 2026 $10.97 $21.90 $10.93
July 1, 2026 $11.37 $22.50 $11.13

 

Suspension of Minimum Wage Increase

The bill does provide a mechanism for the State to institute a one-time delay of the next scheduled increase in the minimum wage based on certain employment indicators. If there is negative employment growth, as measured by certain federal government data, the bill authorizes the Board of Public Works – composed of the governor, comptroller, and treasurer – to order suspension of the next-scheduled minimum wage increase. During the phase-in to a $15.00 minimum wage, however, the Board of Public Works can activate this authority only once.

Other Aspects of the Bill

Health and human services organizations were concerned that they can’t afford to increase the pay of their workers and asked for more state funding to assist with this obligation. As passed, the law obligates the governor to include in future budgets certain funding increases for such organizations. These provisions of the bill will help such organizations – including those that serve people with disabilities, mental illness, substance abuse, and the elderly – ensure they can pay their workers the requisite minimum wages.

If you have any questions, please email Sima Fried and/or Frank Laws or give us a call at 410-752-2468.

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