Hunton Employment & Labor Perspectives

The competing interests of the business community and tipped workers continue to inform public policy decisions about the minimum wage.  We have previously written about increases in the minimum wage on the state, county and municipal level.  Most recently, the cities of Chicago and Denver tackled this issue and joined the many jurisdictions across the country to approve increases to their minimum wage.

When the Chicago City Council approved Mayor Lori Lightfoot’s budget plan on November 26, 2019, it also approved her proposal for a raise to the city’s minimum wage.  Currently $13 an hour for businesses with 21 or more employees, minimum wage will increase for those workers to $14 an hour in July 2020, and then to $15 an hour in July 2021.  Tipped workers also will see an increase in their “sub-minimum wage” from $6.40 to $8.40 in July 2020, and then again to $8.40 per hour in July 2021. Employers with fewer than 21 employees will see their minimum wage rates rise more slowly, in fifty cent increments, until the rate reaches $15 an hour in 2023.  Mayor Lightfoot’s proposal also eliminated exemptions to the minimum wage for people with disabilities, workers under age 18, agricultural workers, and workers in transitional employment programs.

The State of Illinois is moving more slowly towards the $15 per hour goal.  In February, the governor signed into law a bill that raises the state’s minimum wage from $8.25 to $9.25 an hour on January 1, 2020, then to $10.00 an hour by July 2020, after which minimum wage will increase $1.00 each year until 2025, when it reaches $15 an hour.  The federal minimum wage remains at $7.25 an hour.

The increase in the sub-minimum wage for tipped workers represented a compromise of the interests of labor-friendly coalitions and the Chicago restaurant industry.  The labor-friendly groups lobbied for a minimum wage of $13 an hour for tipped workers and concurrent elimination of the tip credit, while the Illinois Restaurant Association and similar industry-friendly groups expressed concern about the effect of such increases on labor costs, particularly for smaller restaurants.  Efforts to increase minimum wage for tipped workers are expected to continue.

On November 27, 2019, Denver became the first Colorado city to set its own minimum wage. Mayor Michael Hancock signed a new minimum wage law, which increases minimum wage in that city from $11.10 an hour to $12.85 an hour on January 1, 2020, $14.77 an hour on January 1, 2021, and $15.87 on January 1, 2022.  Thereafter, annual adjustments will be made based on the Consumer Price Index.  Minors enrolled in specific employment programs will be the only exception to this law, which brings it into conflict with the state law allowing employers of disabled individuals to pay less than the minimum wage if their disability impairs their ability to be productive. CO Stat. 8-6-108.5(2).  Colorado’s state minimum wage will rise to $12.00 an hour in 2020.  Colorado law requires employers of tipped workers to pay them no less than $3.02 an hour less than the state minimum wage.

As in Chicago, the restaurant industry expressed concern about the effect on business, warning of understaffed restaurants and a move towards automation to replace human servers.  The Colorado Restaurant Association has threatened litigation, arguing that the city is not permitted under state law to even pass a minimum wage ordinance until 2020.

Despite such industry opposition, the trend across the country is labor-friendly.  More than half the states and the District of Columbia have minimum hourly wages higher than the federal one.  Some states and several cities are phasing in increases to reach a targeted $15 hourly wage level, or higher.  New York City, San Francisco and Seattle have reached the $15 threshold already. The ultimate effect on the restaurant industry in those locations remains to be seen.