$9.50 is the New $7.25: Minnesota Boosts the Minimum Wage

By Jeremy D. Robb and Heidi N. Christianson

Minnesota has long had one of the lowest minimum wages in the nation. Minnesota’s current minimum wage of $6.15 per hour makes it one of four states with a minimum wage lower than the national rate of $7.25 per hour required under federal law. But this is all about to change.

In April, Governor Mark Dayton signed into law a bill boosting Minnesota’s minimum wage for the first time in roughly a decade. The law will become a reality for nonprofits this summer on August 1. Ultimately, the law will hike Minnesota’s minimum wage to $9.50 per hour by August 1, 2016 ($7.75 per hour for “small” employers) and will thereafter index the minimum wage to inflation.

Because the law distinguishes between large and small employers, nonprofits should first determine whether they are in fact “large” or “small.” “Large employer” means an employer whose annual gross volume of sales or business done is $500,000 or more. “Small employer” means an enterprise whose annual gross volume of sales or business done is less than $500,000. While it is not entirely clear what “gross volume of sales or business” means for nonprofit corporations, it is likely reasonable to interpret this as meaning “gross receipts” or “gross dollar volume” from all business during a 12-month period.

Once a nonprofit determines whether it is large or small, the rate it must pay employees is fairly straightforward. The following table summarizes the wages that nonprofits must pay employees:

Provision Current law New law
Large employer wage $6.15/hour* $8.00/hour on Aug. 1, 2014
$9.00/hour on Aug. 1, 2015
$9.50/hour on Aug. 1, 2016
Small employer wage $5.25/hour $6.50/hour on Aug. 1, 2014
$7.25/hour on Aug. 1, 2015
$7.75/hour on Aug. 1, 2016
90-day training wage
(under 20 years of age)
$4.90/hour $6.50/hour on Aug. 1, 2014*
$7.25/hour on Aug. 1, 2015
$7.75/hour on Aug. 1, 2016
Youth wage
(under 18 years of age)
No youth wage $6.50/hour on Aug. 1, 2014*
$7.25/hour on Aug. 1, 2015
$7.75/hour on Aug. 1, 2016
Inflation increase No inflation increases Inflation indexing begins Jan. 1, 2018

 

*Federal minimum law wages may apply. Under the federal Fair Labor Standards Act (FLSA), the minimum wage is already $7.25 per hour. Subject to a couple narrow exceptions, however, the FLSA generally does not apply to nonprofit organizations.

In light of Minnesota’s new minimum wage laws, we recommend that nonprofit employers take the following steps:
 
  • Determine whether you are a large or small employer.
  • Review your pay practices to determine whether you already pay your employees the required minimum wage.
  • If you do not pay all your employees the required minimum wage, adjust those employees’ wages by the appropriate percentage to meet the required rate.


 

 
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