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May 22, 2019
2019-0969

Maryland minimum wage to increase incrementally to $15

Recently enacted Senate Bill 280 (Chapter 11) will increase the state minimum wage incrementally to $15 per hour by 2025 (July 1, 2026 for employers with 14 or fewer employees), starting with a jump from the current $10.10 to $11 effective January 1, 2020. The legislature overrode Governor Hogan's veto of the bill. (Governor's press release.)

For employers with more than 14 employees, the increase to $11 per hour effective January 1, 2020 is followed: by $11.75 per hour effective January 1, 2021; $12.50 per hour effective January 1, 2022; $13.25 per hour effective January 1, 2023; $14.00 per hour effective January 1, 2024; and $15 per hour effective January 1, 2025.

For employers with 14 employees or fewer, the minimum wage will also increase to $11 per hour effective January 1, 2020, but is followed by: $11.60 per hour effective January 1, 2021; $12.20 per hour effective January 1, 2022; $12.80 per hour effective January 1, 2023; $13.40 per hour effective January 1, 2024; $14 per hour effective January 1, 2025; $14.60 per hour effective January 1, 2026; and $15 per hour effective July 1, 2026.

Youth workers under the age of 18 (changed from the age of 20) may be paid at 85% of the applicable minimum wage. The provision of law that allows an employer of an amusement or a recreational establishment, including a swimming pool, to pay an employee a wage that equals the greater of $7.25 or 85% of the state minimum wage is repealed.

Economic conditions may slow minimum wage increase

The Maryland Board of Public Works (BPW) may temporarily suspend a scheduled increase in the minimum wage for one year under certain circumstances. By October 1, 2020, and October 1 each year thereafter until October 1, 2024, the BPW must determine whether the seasonally adjusted total employment as reported by the federal Bureau of Labor Statistics is negative, in which case the BPW may for one time only suspend an increase to the minimum wage rate. If the minimum wage increase is suspended, the minimum wage in effect for the period beginning the following January 1 must be the same as the rate that was in effect for the preceding 12-month period. The remaining minimum wage rate increases then take effect one year later than the date specified above.

Tipped employees

Maryland law provides that tipped employees (those earning more than $30 per month in tips) may be paid by the employer at a minimum wage $3.63 per hour, as long as the amount paid plus tips equals at least the applicable minimum wage rate. Thus, the tip credit increases as the minimum wage increases, and the wage paid by employers to tipped employees remains $3.63, as long as their wages plus tips equal the minimum wage.

Under SB 280, the Commissioner of Labor and Industry must adopt regulations, in consultation with payroll service providers and restaurant industry trade group representatives, to require restaurant employers that use a tip credit to provide tipped employees with a wage statement for each pay period that shows the effective hourly tip rate as derived from employer-paid cash wages plus all reported tips for tip credit hours worked each workweek of the pay period.

Maryland localities may have other minimum wage requirements

Employers in Prince George's and Montgomery Counties must currently pay at a higher minimum wage (and the minimum wage in Montgomery County will increase to $15 by 2021 for employers of 51 or more employees). Employers will need to take special care in meeting the minimum wage requirements of both the state and local government.

Ernst & Young LLP insights

Maryland joins several other states (most recently Illinois and New Jersey) in establishing a $15 per hour minimum wage. For more information on the minimum wage in effect for other states, see EY Payroll Newsflash Vol. 20, #010, 1-10-2019.

For more information on Maryland's minimum wage law, see the Department of Labor and Industry's website.

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Contact Information
For additional information concerning this Alert, please contact:
 
Workforce Advisory Services - Employment Tax Advisory Services
   • Kenneth Hausser (kenneth.hausser@ey.com)
   • Debera Salam (debera.salam@ey.com)

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