UPDATES

• Duarte, CA's ballot measure FAILED (official results)
• Inglewood, CA's ballot measure PASSED (official results)
• Laguna Beach, CA's ballot measure FAILED (official results)
• San Leandro, CA's minimum wage ordinance will no longer exist in 2023 due to the state minimum wage overtaking the local rate
• San Mateo County, CA enacted a new ordinance that will take effect on April 1, 2023 and apply in the county's unincorporated areas.
• Colorado adopted its proposed exempt pay increases (2023 Pay CALC Order)
• District of Columbia's ballot measure PASSED but must still undergo congressional review (official results). The measure was not sent to Congress until January 10, 2023, and the "projected" date for the amendments to take effect is March 8, 2023 per the District's legislative website.
• Portland, ME's ballot measure FAILED (official results)
• Nebraska's ballot measure PASSED (official results)
• Nevada's ballot measure PASSED (official results)
• New York adopted its proposed pay rate increases
• Tukwila, WA's ballot measure PASSED (official results). The ballot measure requires a minimum wage for large employers that is "an hourly wage of not less than the 2022 'living wage rate' in the City of SeaTac [] adjusted for 2023 by the annual rate of inflation," and the small employer rate is $2 per hour less. Tukwila announced that rather than using the CPI-adjusted rate that applies in SeaTac in 2023 ($19.06), the Tukwila rate is to be calculated by taking the 2022 SeaTac minimum wage and applying a CPI adjustment standard that differs from the one SeaTac uses.

Minimum wage laws can affect businesses of all sizes, whether operating nationwide, in multiple jurisdictions, or only in one state, county, or city. To help manage this challenge, below we summarize scheduled state- and local-level wage increases that will occur on January 1, 2023 (or on New Year’s Eve in parts of New York State).¹ Employers can use this information to determine the minimum amount they must pay non-exempt, tipped, and certain exempt employees. Before we chart out these rates, we briefly highlight some notable wage and hour developments that have occurred since our mid-year article, including minimum wage related ballot measures from the November 8, 2022 election.

Pending or future legislation, or ballot measures, might change rates that will apply in 2023, so we recommend employers monitor these developments and consult with counsel to confirm rates did not change since publication.

Notable 2022 (Second Half) Wage & Hour Developments

Inflation: The elephant in every room, inflation, continued to loom large in the latter half of the year. For example, below are, to date, the 2022 national averages for the Consumer Price Index (CPI) for All Urban Consumers (CPI-U) and the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

Minimum wage standards were not spared inflation’s wrath. Like inflation numbers, minimum wage rates and pay standards for tipped and exempt employees are going up. Before we crunch those numbers, however, we want to highlight some more notable inflation-related developments.

Proactive Inflation Measures: Large increases to the CPI activated CPI-related clauses in California and New Jersey that many employers might have forgotten existed.

When California amended its minimum wage law in 2016, it established preset rates in 2017 through 2023, with different rates in 2017 through 2022 depending on whether an employer had 26 or more, or 25 or fewer, employees, and then the same rate for all employers in 2023 that would be annually adjusted in 2024 and future years. Additionally, the legislature inserted various economic metrics for the state to consider that would affect whether the minimum wage should increase (a pause button) or must increase (a fast forward button). Because inflation was so high, the state finance department pushed the fast forward button, which: 1) eliminated the originally planned one-year period (2023) when one minimum wage ($15) would apply to all employers; and 2) brought forward by one calendar year – from 2024 to 2023 – the date when it must annually adjust the minimum wage rate (increasing the rate to $15.50 for all employers).

In 2019, New Jersey amended its minimum wage law. In addition to establishing different minimum wage rates for different types of employers and employment, and establishing a higher minimum wage rate that would apply on July 1, 2019, the state established two potential outcomes for what those minimum wage rates would be in 2020 and subsequent years. Specifically, although the legislature established preset rate increases, it also wrote into the law a requirement that, if the preset “new” rate for the forthcoming year was less than the “old” rate annually adjusted due to changes to the CPI, the CPI-adjusted rate would be “the” minimum wage for the next year. New Jersey’s Department of Labor and Workforce Development announced that, because the 2022 minimum wage rate, when adjusted for inflation (8.7%), exceeded the pre-set rate in the statute for 2023, the CPI-adjusted rates will be "the" applicable minimum wage rate in 2023.

Reactive Inflation Measures: While some jurisdictions were proactive in amending their minimum wage laws, the rise in inflation caused others to be reactive. For example, San Mateo, California amended its ordinance to discuss how, for 2023 and future years, it would annually adjust its minimum wage rate based on CPI changes. In addition to providing that the city could round to the nearest five cents when performing the calculation, the city also included a cap concerning how much the rate could increase: 3.5%. Additionally, the amended ordinance requires that, if the applicable rate of inflation exceeds 3.5%, the excess amount gets “banked” and will be applied when making CPI-related adjustments in future years. So, for example, because the rate of inflation the city used for making its annual adjustment was around 5.7% – i.e., it exceeded 3.5% – the extra ~2.5% will be applied to the calculation of the 2024 rate if the rate of inflation is less than 3.5%, or when calculating the minimum wage in future years should inflation equal or exceed 3.5% when it calculates the 2024 rate. In Redwood City, California, the city approved similar amendments that create a 5% cap rather than 3.5%, with excess CPI “banked” for future years, and rounding to the nearest five cents.

In Denver, Colorado, by contrast, the changes were more subtle. 2023 is the first year the city adjusts its minimum wage rate. The amended ordinance specifies that Denver will use the same timeframe the state does: comparing the half-year CPI for the calendar year preceding the adjustment (for 2023, that’s 2022) against the half-year CPI for the year before that (for 2023, that’s 2021).

Industry-Specific Minimum Wage Laws in California: Prior to 2022, the Golden State was no stranger to industry-specific laws, with around a handful of minimum wage (or wage-related) ordinances that applied to hotels and related entities, e.g., Emeryville, Long Beach, Los Angeles, Oakland, and Santa Monica. However, in the second half of 2022, there was an explosion of activity related to the hotel, healthcare, and fast-food industries.

Fast Food: On September 5, 2022, Governor Newsom signed into law Assembly Bill 257, the Fast Food Accountability and Standards Recovery Act, which creates the Fast Food Council within California’s Department of Industrial Relations. Among the many powers the Council could exercise under this new law is the ability to establish a minimum wage for covered fast food workers that could exceed the minimum wage that generally applies to workers throughout the state. The next day, however, a referendum petition was filed, proposing that voters should decide whether the law should take effect. Currently, the measure is collecting signatures to qualify for a future election.

Healthcare: Though Southern California might be known more for its cosmetic procedures, the minimum wage changes advocates were pushing for in multiple cities were anything but superficial. They wanted a $25 minimum wage for healthcare workers – broadly defined – with annual CPI-adjusted increases in future years. Initially, they succeeded in convincing elected officials in Downey, Long Beach, Los Angeles, and Monterey Park to enact healthcare worker minimum wage ordinances. Before any of these laws took effect however, referendum petitions were filed to, as with the state fast food worker law, have voters decide the outcome (as city officials in Duarte and Inglewood chose to do instead of passing a law themselves). In Downey, Long Beach, Los Angeles, and Monterey Park, voters will decide the measure’s fate at a 2024 election.

Not all efforts to decide the matter in 2022 were successful. For example, insufficient signatures were collected to place a healthcare MWO on the ballot in Baldwin Park.

Hotels: On July 27, 2022, Glendale’s Hotel Workers Protection Ordinance took effect, as did, around two weeks later on August 12, 2022, the Los Angeles Hotel Worker Protection Ordinance (HWPO). Granted, the minimum wage was not these ordinances’ primary focus, but it was impacted. In Los Angeles, the HWPO amended the pre-existing Citywide Hotel Worker Minimum Wage Ordinance (CHWMWO) to expand covered hotels from those with 150 or more guest rooms to entities with 60 or more guest rooms. Glendale, conversely, created a new minimum wage obligation, using the same rate and update schedule as the CHWMWO (like Santa Monica does).

Industry-Specific Minimum Wage Laws in New York: Effective October 1, 2022, a new statute, New York Public Health Law section 3614-f, establishes a minimum wage for home care aides that is $2 per hour more than the applicable state minimum wage (which differs based on geographic region), and the rate will increase an additional $1 per hour on October 1, 2023.

Old-Fashion Amendments: If your head is spinning after all these inflation- and industry-related developments, and you just want to hear about some “normal” changes, let’s talk about Hawaii. Sure, it might not have happened “exactly” during the second half of the year, but the enactment of House Bill (HB) 2510 on June 22, 2022 is “close enough.” Before HB 2510, Hawaii’s minimum wage was $10.10 per hour. The bill increased the minimum wage to $12.00 on October 1, 2022, and then in future years, on January 1, to the following amounts: $14.00 (2024); $16.00 (2026); and $18.00 (2028). Additionally, Hawaii changed how tipped employees must be paid. Hawaii, like most states, allows employers to count tips an employee receives toward the employer’s minimum wage obligation if – here is where Hawaii is a bit different – the employee’s wage from their employer plus tips they receive equal at least $7.00 more than the minimum wage. Before HB 2510, the maximum tip credit employers could apply was 75₵. On October 1, 2022, it increased to $1.00, and will increase to $1.25 on January 1, 2024, and to $1.50 on January 1, 2028.

Mayhem in Michigan: On July 19, 2022, a state judge in Michigan’s Court of Claims held that the state legislature violated the Michigan Constitution in 2018 when, during a lame-duck session, it overhauled revisions to Michigan’s minimum wage and tip law (and newly created paid sick and safe time law) only months after it adopted as law two proposed ballot measures covering these topics. On July 29, 2022, the judge stayed the order through February 19, 2023, as the state appealed the decision. Oral arguments before the Michigan Court of Appeals will occur on December 13, 2022.

New Mexico Local Minimum Wage Announcements Continue to Puzzle: In 2020, the Albuquerque minimum wage was $9.35. In 2021, the city announced the applicable CPI increase was 1.393% but increased the local minimum wage to $10.50, i.e., the state minimum wage (12.3% increase). In 2022, the city announced the applicable CPI increase was 5.832% but again increased the local minimum wage to the state rate, $11.50 (9.5% increase from 2021 state rate). In 2023, the city announced the applicable CPI increase was 8.638%. Originally, the city announced the local minimum wage would be $12.50, applying the CPI increase under the ordinance to the 2022 state rate, producing a rate that exceeded the 2023 state minimum wage of $12, which was the rate used in the city’s subsequent revised announcement (though it also acknowledges the CPI-adjusted rate would be less than the state rate). Additionally, in each of these years, the city announced the minimum cash wage for tipped employees would be a percentage of the state minimum wage rather than a percentage of the local minimum wage as the ordinance appears to require.

In 2020, the Las Cruces minimum wage was $10.25. In 2021, 2022, and now 2023, the city announced the local minimum wage would increase to the rate set under state law; $10.50, $11.50, and $12.00, respectively. During these announcements, the city did not indicate the CPI increase percentage. Additionally, in each year, the city announced the minimum cash wage would be a percentage of the minimum wage, as required under the ordinance, but based on a percentage of the state rate. Note, however, that for 2023 the announced minimum cash wage of $4.78 appears to be lower than 40% of the announced minimum wage, as $4.80 would be 40% of $12.

The approaches taken by Albuquerque and Las Cruces differ from those by Bernalillo County, whose ordinance contains a similar CPI-adjustment requirement. In 2021 and 2022, the county continued to adjust its rate based on inflation, but indicated that the CPI-adjusted rate was less than the rate required under the state minimum wage, so state law would supersede county law. A 2023 announcement has not yet been made.

Ballot Measures: At the November 8, 2022 general election, voters across the country were asked to determine the fate of numerous minimum wage ballot measures. Although counting votes remains underway, below is an unofficial snapshot of how things stood when we went to press. Interestingly, though minimum wage ballot measures perform well normally, a lower-than-normal pass rate appears to be in the cards this year. When we know the officials results, we will provide an update.

State (or Equivalent) Measures

• District of Columbia (YES Ahead): Initiative 82 proposes to phase out gradually the tip credit, eliminating it effective July 1, 2027. It will increase the $5.35 per hour minimum cash wage rates for tipped employees as follows, until employers can no longer count tips received toward their minimum wage obligation on July 1, 2027: $6.00 (January 1, 2023); $8.00 (July 1, 2023); $10.00 (July 1, 2024); $12.00 (July 1, 2025); $14.00 (July 1, 2026). Go here for unofficial election results.
• Nebraska (YES Ahead): Initiative 433 proposes to increase gradually the current $9.00 per hour minimum wage as follows: $10.50 (January 1, 2023); $12.00 (January 1, 2024); $13.50 (January 1, 2025); $15.00 (January 1, 2026). Beginning on January 1, 2027, and each subsequent January 1, the measure would require the state to annually adjust the minimum wage based on inflation. Go here for unofficial election results.
• Nevada (YES Ahead): Question No. 2 proposes to amend the state constitution to eliminate the two-tiered minimum wage system based on whether an employer offers health benefits and establish a single $12 minimum wage for all Nevada employees (or an amount equal to the federal rate if higher). Additionally, if passed, the measure would eliminate annual adjustments to the minimum wage; instead, whether, and in what amount, to increase the minimum wage would fall to the legislature and governor. Go here for unofficial election results.

Local Measures

• California (Duarte) (NO Ahead): Measure J would create the Healthcare Workers Minimum Wage Ordinance, establish $25.00 per hour minimum wage for covered healthcare workers, which, beginning January 1, 2024, and each subsequent January 1, the city would annually adjust based on inflation. Go here for unofficial election results.
• California (Inglewood) (YES Ahead): Measure HC would create the Healthcare Workers Minimum Wage Ordinance, establish $25.00 per hour minimum wage for covered healthcare workers, which, beginning January 1, 2024, and each subsequent January 1, the city would annually adjust based on inflation. Go here for unofficial election results.
• California (Laguna Beach) (NO Ahead): Measure S proposes to create the Hotel Worker Protection Ordinance, which, in part, would create a $19.00 per hour² minimum wage in 2023 for covered hotel workers that would increase annually on January 1 – $20.00 (2024); $21.00 (2025); $22.00 (2026) – and then, on January 1, 2027, and each subsequent January 1, the city would annually adjust the minimum wage based on inflation. The measure also includes provisions concerning protecting hotel workers from violent or threatening conduct, and provisions concerning workloads and overtime. Go here for unofficial election results.
• Maine (Portland) (NO Ahead): Question D would amend the minimum wage schedule as follows: $15.00 (January 1, 2023); $16.50 (January 1, 2024); $18.00 (January 1, 2025). Beginning on January 1, 2026, and each subsequent January 1, the measure would require the city to annually adjust the minimum wage based on inflation. Additionally, it would phase out gradually the tip credit, eliminating it effective January 1, 2025, with a $10.00 minimum cash wage applying in 2023, and a $14.00 rate applying in 2024. Finally, the measure would expressly include in the definition of “employee” individuals who work for a driver or delivery service, but would not apply to transportation network companies and their drivers. Go here for unofficial election results.
• Washington State (Tukwila) (YES Ahead): Proposition No. 1 seeks to create a local minimum wage ordinance beginning on July 1, 2023. At that time, a $19.06 per hour³ rate would apply to “large” employers – those that employ 501 or more employees regardless of location, and all franchisees associated with a franchisor or a network of franchises with franchisees that employ 501 or more employees in aggregate. For other covered employers who are not “large” employers – those with 15 or more employees regardless of location, or those with annual gross revenue exceeding $2 million – the minimum wage will be $2 per hour less, so $17.06. On January 1, 2024, the rate for “large” employers would again be annually adjusted based on inflation, and on July 1, 2024, the rate for other employers would increase to $1 per hour less than the “large” employer rate. On January 1, 2025, the “large” employer rate would again change based on inflation, and on July 1, 2025, that rate would apply to all employers. On January 1, 2026, and each subsequent January 1, the rate for all employers would be annually adjusted based on inflation. Finally, a provision in the ordinance would require covered employers to offer certain part-time employees additional hours before hiring new workers. Go here for unofficial election results (Click the “Printable format” link).

Minimum Wage Changes

In this section we highlight states, counties, and cities where the minimum wage will increase on January 1, 2023 (or on December 31, 2022 in New York State), or has increased in 2022 since our mid-year update. Additionally, in these jurisdictions, we examine the corresponding minimum cash wage (MCW) and tip credit (TC) rates for tipped employees. In certain jurisdictions – excluding, e.g., Alaska, California, Minnesota, Montana, Washington – employers may be able to count tips an employee receives toward the minimum wage. In those jurisdictions that permit a tip credit allowance, if the direct wage and tips an employer pays an employee 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.

First, we look at changes that occurred in 2022 before publication. After that, we focus on how the rates will change on January 1 in jurisdictions where the law itself establishes the rate(s) employers must pay employees. Then, we highlight January 1 rates in jurisdictions that annually adjust their rate due to changes to the consumer price index (or on December 31, 2022, in New York).

Post-July 1, 2022 Changes

January 1, 2023 Changes

Pre-Set Rate Changes

Changes Based on (or Affect By) Consumer Price Index Changes

Minimum Wage

To demonstrate how inflation is affecting annual adjustments, below we identify: 1) current and future wage rates; 2) whether the annual adjustment uses CPI-U (Consumers) or CPI-W (Workers); 3) the time period the jurisdiction uses when determining the applicable inflation rate; 4) the percentage by which the rate is changing (if the law caps how much the rate can increase, we note “Cap”); and 5) whether and how the jurisdiction “rounds” the adjusted figure to a nearest monetary decimal figure.

Minimum Cash Wage & Maximum Tip Credit

Exempt Employees

Executive, Administrative and/or Professional Employees: The following states have pay requirements that are: 1) changing on January 1, 2023 (December 31, 2022 in New York); and 2) will exceed the minimum amount employers must pay exempt executive, administrative, and professional employees under the federal Fair Labor Standards Act (FLSA), i.e., $684 per week or $35,568 annually.

In Alaska, where employees must be paid on a salary or fee basis at a rate of not less than twice the state minimum wage for the first 40 hours of employment each week, excluding employer-furnished board or lodging, the weekly minimum salary will increase from $827.20 to $868 ($40.80).

In California, where employees must earn a monthly salary equivalent to no less than twice the state minimum wage for fulltime employment (employment in which an employee is employed for 40 hours per week), the weekly minimum salary will increase from $1,120 (employers with 25 or fewer employees) and $1,200 (employers with 26 or more employees) to $1,240 (all employers) ($120 and $40, respectively).

In Colorado, where employees must be paid at least the salary amount established in regulations and the salary must be sufficient to pay the minimum wage for all hours in a workweek, the weekly minimum salary in the proposed* regulations will increase from $865.38 to $961.54 ($96.16). Additionally, for purposes of the state’s highly compensated employee exemption, such employees must receive at least this weekly salary amount plus their annual salary must equal at least 2.25 times the rounded annual salary for exempt employees, which will increase from $101,250 to $112,500 ($11,250). *Although technically proposed, we do not expect the final numbers to be different.

In Maine, where regular compensation, when converted to an annual rate, must exceed 3000 times the state minimum wage or FLSA’s annual salary rate, whichever is higher, the annualized rate to exceed will increase from $38,250 (or $38,251 per the state labor department) to $41,000 (or $41,401 per the state labor department).

In New York (outside of New York City, Nassau, Suffolk & Westchester Counties³³), where an exempt executive or administrative employee must be paid a salary, including board, lodging, or other allowances and facilities, the weekly minimum salary in proposed* regulations will increase from $990 to $1,064.25 on December 31, 2022. *Although technically proposed, we do not expect the final numbers to be different.

In Washington State, where employees must be paid on a salary or fee (if administrative or professional only) basis at a rate of not less than a specific multiplier of the state minimum wage for a 40-hour workweek, excluding board, lodging, or other facilities, the weekly minimum salary will increase from $1,014.30 to $1,101.80 (employers with 50 or fewer employees – 1.75 multiplier – $87.50) and from $1,014.30 to $1,259.20 (employers with 51 or more employees – multiplier increases from 1.75 to 2 times in 2023 – $244.90).

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, 2023: Arizona (all 4 exemptions); Colorado; Illinois; Massachusetts; New Jersey; South Dakota; Virginia. Additionally, in Arizona and Colorado, there will be increases to local minimum wage rates.

Computer Employees: In California, certain computer software employees are exempt from state overtime requirements if they receive in 2023 a minimum hourly rate of $53.80 (an increase of $3.80), a minimum monthly salary amount of $9,338.78 ($659.62), or a minimum annual salary amount of $112,065.20 ($7,915.39). In Colorado, employees in highly technical computer-related occupations must receive at least the lesser of the applicable salary noted above or hourly pay that, per proposed* regulations, in 2023 is at least $31.41 ($2.49) (*Although technically proposed, we do not expect the final numbers to be different). In Washington State, exempt computer employees paid on an hourly basis must be paid $55.09 (an increase of $4.37 per hour for all employers).

Medical Employees: In California, the law also provides that licensed physicians and surgeons are exempt from state overtime requirements if in 2023 they receive a minimum hourly rate of $97.99 (an increase of $6.92).

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 December 31, 2022* and/or January 1, 2023 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; Colorado; Minnesota; *New York (Possibly); Washington.