Over the past few years, numerous states and municipalities have increased the statutory minimum wage.  Further, through Executive Order, President Obama increased the federal minimum wage applicable to federal contractors.  Consistent with this trend, the governors of both California and New York have now reached new legislative deals with their respective legislative branches which provide for significant increases to the minimum wage in each state.

In California, Governor Brown is expected to sign legislation this week which will eventually raise the state minimum wage to $15 per hour.   This will be a 50 percent increase from the current state minimum wage, already the highest current state minimum wage (though the District of Columbia’s minimum wage is slightly higher, at $10.50).  The measure will raise  California minimum wage to $10.50 in January and to $11 in January 2018. It will then increase by an additional $1 per hour every year until it reaches $15 in 2022. If, however, the state goes through an economic downturn or budget crisis, the governor can choose to slow the implementation. The final bill gives small businesses, with 25 or fewer employees, an extra year to implement the increases.  Note that many municipalities have higher minimum wage obligations, so state employers also must consider local law.  The tip credit remains unavailable for California employers.

The New York legislation divides the State into three regions:  New York City; Downstate (Long Island and Westchester County); and the balance of New York State (meaning, all counties “upstate” from the greater New York City area).  The law provides for gradual increases to the minimum wage over the next five years, but with more accelerated increases for NYC, Long Island, and Westchester.  NYC is further divided between large employers (those with 11 or more employees) and small employers (those with 10 or less).  For large NYC employers, the minimum wage will rise to $15.00 by the end of 2018.  Small NYC employers will have another year, until December 31, 2019, before the $15.00 per hour rate applies.  In Long Island and Westchester County, the wage would rise to $15 by the end of 2022.   In the rest of the State, the wage would hit $12.50 in 2021, then increase to $15 on an as-yet undetermined schedule based on the economic impact of further increases.  The New York legislation also retains the tip credit for tipped employees, setting the cash wage at two thirds the applicable minimum wage or $7.50, whichever is higher.

Final regulations will presumably help clarify the minimum wage obligations under these new wage rates for employers operating in multiple jurisdictions (within or outside these states).  Now more than ever, employers must regularly review state and local minimum wages to ensure compliance.