A Quick Look at U.S. Wage Increases

Notable Post-July 1, 2023 Developments

On August 30, 2023, the Wage and Hour Division of the U.S. Department of Labor (DOL) released a Notice of Proposed Rulemaking to revise the "white collar" overtime exemption regulations applicable to executive, administrative, and professional employees. The DOL proposes to substantially increase the minimum salary level needed to qualify as exempt. While the exact salary level that would be included in a final rule is not yet known, it is expected that the salary level will be at least $1,059 per week ($55,068 annualized).

On October 6, 2023, Chicago, Illinois amended (pdf) its minimum wage ordinance to gradually phase out the tip credit for tipped employees. More specifically, through June 30, 2024, the tip credit will remain 40% of the minimum wage. However, on July 1, 2024, it will decrease to 32% of the minimum wage, and decrease further on July 1 of future years — 24% (2025); 16% (2026); and 8% (2027) — until employers can no longer apply a tip credit on or after July 1, 2028, meaning tipped employees must receive at least the full minimum wage.

Changes on January 1, 2024

In the below chart we include the (mostly) generally applicable minimum wage (MW) that will change on January 1, 2024. We list the rate that applied before the change (Pre) alongside the new rate (Post). In certain jurisdictions — excluding, e.g., Minnesota, and others — employers may be able to count tips an employee receives toward the minimum wage. In those jurisdictions that permit a tip credit (TC), if the direct wage an employer pays (minimum cash wage or MCW) and tips an employee earns equals the minimum wage, an employer satisfies its minimum wage obligation, but, if the direct wage plus tips does not equal the minimum wage, an employer must pay the employee the difference.

Exempt Employee Pay Changes

Executive, Administrative and/or Professional Employees: The following states have pay requirements that are: 1) changing on January 1, 2024; and 2) will exceed the minimum amount employers must currently pay exempt executive, administrative, and professional employees under the federal Fair Labor Standards Act (FLSA), i.e., $684 per week or $35,568 annually (see above concerning proposed rate changes).

White Collar Employees Covered by Minimum Wage: In various states, employees covered by the executive, administrative, professional, or outside sales exemptions are exempt from state overtime requirements, but not exempt from state minimum wage requirements. In these jurisdictions, such employees must earn at least the applicable minimum wage for each hour worked in a workweek. Of these states, the following will increase their minimum wage on January 1, 2024: Arizona (All 4 exemptions), Colorado, Illinois, New Jersey, Rhode Island (possibly), and South Dakota. Additionally, in Arizona and Colorado, there will be increases to local minimum wage rates.

Commissioned Employees: To qualify under the FLSA's 7(i) overtime exception, the regular rate of pay for an employee of a retail or service establishment must exceed one-and-a-half times the federal minimum wage, and more than half the employee's compensation for a representative period (not less than one month) must represent commissions on goods or services. In the following states with upcoming January 1, 2024 rate changes, the 7(i)-type exemption requires — in part — an employee's pay to either equal or exceed one-and-a-half times the state minimum wage: California ($16.00); Colorado ($14.42); Minnesota ($10.85 or $8.85, depending on the employer's gross sales); New York (Possibly) ($16 or $15, depending on location); Washington ($16.28). Additionally, Connecticut requires pay to equal or exceed two times the state minimum wage ($15.69).