Employer Alert: Maryland General Assembly Approves $15.00 Minimum Wage
In a not unexpected move, on March 20, 2019 the Maryland General Assembly approved a significant increase in the states minimum wage from the current rate of $10.10 per hour to $15.00 by 2025. The increase is scheduled to begin on January 20, 2020, where the rate would go from $10.10 per hour to $11.00 per hour. Then, there would be a series of $.75 per hour increases on each January 1, 2021, 2022, 2023 and 2024. Then, in the final year, beginning January 1, 2025 the minimum wage would be $15.00 per hour.
The new wage rate, if enacted, would apply to all Maryland employers with fifteen (15) or more employees. Employers with less than fifteen (15) would have a little bit longer period of time within which to reach the $15.00 per hour level. For those smaller employers, the annual increases would be at $.60 per hour rather than $.75 so that by January 1, 2024, the wage rate would be $15.00. Beginning July, 2026, the small employers would be required to pay $15.00 per hour.
One significant proposal that was not included in the proposed legislation was the elimination of the tip credit. Earlier versions of the legislation had called for the elimination of the tip credit for restaurant and service employees who customarily receive tips as part of their compensation. The new law makes no change in that provision, which is currently $3.63 per hour, provided that the employee receives at least enough in tips to meet the then current minimum wage figure. There is also an exception for employees under 18 as a training wage. Agricultural workers are excluded from the legislation.
The big question is whether Governor Larry Hogan will sign the proposed legislation into law. Governor Hogan has earlier stated that he the wage increase to $15.00 is too high and will disadvantage Maryland employers as the minimum wage in the surrounding states is much less. For example, in Pennsylvania and Virginia, the current minimum wage is $7.25 per hour. In West Virginia, the minimum wage is $8.75; Delaware’s minimum wage is scheduled to increase to $9.25 on October 1, 2019. In fact, the only local jurisdiction with a comparable wage rate is the District of Columbia, which is currently $13.25, with scheduled increases to $14.00 and then $15.00 by July 2020.
Governor Hogan had proposed increasing the minimum wage from $10.10 per hour to $12.10 per hour over a two (2) year period with further increases possible if the surrounding states also increased their wages. In light of the General Assembly’s recent action, however, the Governor’s proposal is not likely to have any effect.
Under the General Assembly’s procedural rules, once the legislation is presented to Governor Hogan, he has six (6) days to sign or veto the legislation. The legislation can also become law if Governor Hogan takes no action at all during that period.
The proposed legislation passed both the House of Delegates and the Senate by wide margins, sufficient to override any veto by Governor Hogan.
With the passage of this legislation, Maryland becomes one of the first states leading the charge in the “Fight for Fifteen” campaign. While that may amount to a political success for some, time will tell whether or not it will provide any help to those workers now at the bottom of the wage scale. Studies have shown that when the minimum wage is increased significantly, there also is a significant number of low wage workers who lose their jobs because they become too expensive for the employer to maintain. Employers in the service industry will bear the brunt of this new legislation that, if enacted, will require them to either cut back on hours for the employees, lay-off employees and/or raise the price for its services to cover these new costs.