Fall 2007 issue of Horizons

INDUSTRy u

HOSPITALITY

Unexpected Results Of New Minimum Wage Laws Missouri voters were simply asked whether or not the minimum wage should be increased. The actual changes to the Missouri law are much more extensive. Missouri has had minimum wage laws. However, for the most part, they deferred to the federal minimum wage laws and all the federal exemptions, administrative rules and subsequent case law. Prior to this past election, the federal minimum wage law applied to all but the very smallest of Missouri employers. To create the new Missouri minimum wage, the Missouri law was amended to eliminate the deferral to the federal law. When there is a conflict between federal law and Missouri law, the employer must comply with the law that is more favorable to the employee. For example, as of Jan. 1, 2007, the Missouri minimum wage is $6.50 per hour and the federal minimum wage is $5.15 per hour. Employers must comply with the Missouri law of $6.50 per hour because it is more favorable to the employee. In the hospitality industry, federal law allows tipped employees to be paid $2.13 per hour of base pay plus tips to earn at least $5.15 per hour. As of Jan. 1, 2007, the Missouri minimum pay for tipped employees is $3.25 per hour plus tips to earn at least $6.50 per hour. Again, the Missouri employer must comply with the law more favorable to the employee – $3.25 per hour plus tips to earn at least $6.50 per hour. In other industries, federal law carved out special methods for calculating overtime pay or determining which employees were subject to overtime pay and which employees were exempt from overtime pay. Missouri law

contains many of these federal exceptions, but not all of them. For instance, federal law allows some industries to calculate overtime over a 14-day work period instead of a traditional 7-day week. Missouri law does not allow this option for all industries. Missouri also failed to enact a provision similar to what is commonly known as the “7(i) exemption” under federal law for commissioned sales employees. But what about other states? At the time of the writing of this article, there are more than 20 states that now have state minimum wage laws that exceed the federal $5.15 per hour. Like Missouri, many also have decoupled from the broader federal employment laws that controlled who is subject to overtime rules and how that overtime is computed. For example, Illinois matches Missouri’s state minimum wage of $6.50 per hour. However, an Illinois tipped employee’s base wage is $3.90 per hour versus Missouri’s $3.25 per hour. Kansas still defers to the federal law. However, Kansas employers exempt from the federal law default to the Kansas law, which allows for a minimum wage of $2.65 per hour. As we start another year, it is the perfect time to review your organization’s wage and hour compliance. Many rules have changed over the last few years, and much discussion and debate will continue as legislators monitor this area. You do not want to be assisted in reviewing your compliance by your state’s Department of Labor.

Questions? Contact Jim Mather, CPA Partner-in-Charge, Hospitality Services Group 314-290-3470 jim.mather@rubinbrown.com

As of Jan. 1, 2007, the Missouri minimum pay for tipped employees is $3.25 per hour plus tips to earn at least $6.50 per hour.

29 u winter 2007 issue