Our system of government allows for strong state governments and limits on the powers exercised by Washington. It is a system with plenty of merits that make maintaining it worthwhile. But it also has some drawbacks. For example, the division of jurisdictions among state and federal authorities has led to a convoluted mess where minimum wage is concerned.
There is a federal minimum wage that currently stands at $7.25 per hour. This rate was set in 2009. Additionally, federal law requires nonexempt employees who work in excess of 40 hours per week to receive one-and-a-half times their normal pay rate for every extra hour worked. Simple enough, right? It is in states that defer to the federal law. But most states do not. Most have their own minimum wage and overtime laws.
BenefitMall, a Dallas-based provider of payroll and benefits administration services, says that the various state laws are similar in some ways but drastically different in others. As such, employers with multi-state operations can have a difficult time trying to manage payroll. That’s where professional payroll services come in handy.
Minimum Wage and Overtime
There are a number of states that mandate a minimum wage well in excess of the federal minimum wage. On top of that, they apply a far different overtime pay formula. California is a good example. Workers in California are entitled to overtime pay whenever they work more than eight hours in a single day, 40 hours in a single week, or more than six consecutive days.
Minimum Wage and Cost-Of-Living
Some states tie minimum wage to the cost-of-living. Take Colorado, for example. Their state minimum wage currently stands at $10.20 per hour. It is re-evaluated every year to take into account cost-of-living increases. Strangely enough, Colorado’s minimum wage law only applies to workers in the food service, medical, retail, and service industries.
Florida, Missouri, and Oregon are three more states that follow the cost-of-living model. But here’s what you need to know: a lower cost-of-living will not trigger downward movement in minimum wage. Minimum wage can only go up as a result of a higher cost-of-living.
Minimum Wage and Health Insurance
Perhaps the most convoluted minimum wage law in the country is found in Nevada. Californians might argue, but Nevada has a system that allows employers not required under the ACA to offer health insurance to pay hourly workers $1.00 less than the state minimum wage if they voluntarily provide health insurance.
In order to pay workers less, employers have to offer a qualifying health insurance plan that meets the following conditions:
- The employee’s share of the premium may not exceed 10% of that person’s gross taxable income;
- The health insurance policy must protect against a specific list of injuries and illnesses; and
- The policy must cover a list of healthcare expense categories that can be deducted on a federal tax return.
Nevada’s State Supreme Court recently ruled on the case involving health insurance and the minimum wage. Rather than deciding the case, they sent it back to a lower court to try to figure out a middle ground that would satisfy both employer and employee. The case is likely to drag on for quite a while as the lower court attempts to work it out.
Our minimum wage system in the U.S. is pretty much a mess. Would it be better to have a federal standard that supersedes state laws? That depends on your view of the Constitution. For now, employers have to do everything they can to comply with the law in states where they operate.