On August 1, 2014 Minnesota’s new minimum wage takes effect. Starting August 1, if a large employer has an annual gross revenue of $500,000 or more, that employer must pay at least $8.00 an hour. Prior to August 1, 2014 the annual threshold for a large employer was gross revenue of $625,000 or more. Under the new rule, that threshold has been decreased to $500,000. For small employers, a business with an annual gross revenue of less than $500,000, that employer must pay at least $6.50 an hour. The new minimum wage hikes increase the large employer wage by $1.85 an hour and the small employer wage by $1.25 an hour. In addition to the wage hikes for large and small employers, Minnesota is once again implementing a youth wage minimum of $6.50 an hour. Youth wage applies to employees who are under 18 years of age.

It is important to remember that there are both state minimum wage laws and federal minimum wage laws. An employee is entitled to the higher of the two minimum wages when an employee is covered by both the state and federal minimum wage laws. Minimum wage rates apply to all hours worked whether part or full time, and employees must be paid at least the current minimum wage rate no matter how they are paid.

With regards to employees who are in the service industry, no employer may take a tip credit against minimum wages in Minnesota, which means that an employee must be paid at least the minimum wage per hour plus any tips the employee might earn.

Most notably, the new minimum wage bill does not end at simply raising the minimum wage for the year of 2014. The bill signed by Governor Dayton phases in new increases in the minimum wage over the next several years. Starting in 2018 Minnesota’s minimum wage will be indexed to inflation to help insure Minnesotans wages keep up with the cost of living. Between 2014 and 2018 the large employer wage will increase from $8.00 an hour in 2014 to $9.50 an hour in 2016. For a small employer the minimum wage will go from $6.50 in 2014 to $7.75 in 2016. Prior to this law change Minnesota had one of the lowest minimum wages in the entire country.