Compensation, FLSA/Wages, News

Maryland Takes Step Toward $15 Minimum Wage

In a widely expected move, the Maryland General Assembly has approved a significant increase in the state’s minimum wage by voting for legislation aimed at increasing the current rate of $10.10 per hour to $15 by 2025.minimum wage

If the legislation is enacted, the rate will go to $11 per hour on January 20, 2020, and will be followed by a series of 75-cent-per-hour increases on each January 1 from 2021 through 2024. Then the rate will go to $15 per hour on January 1, 2025.

The legislation applies to all Maryland employers with 15 or more employees. Employers with fewer than 15 employees will have more time to reach the $15-per-hour level. For those smaller employers, the annual increases will be at 60 cents per hour, with the rate reaching $15 beginning in July 2026.

One proposal not included in the legislation was the elimination of the tip credit. Earlier versions had called for the elimination of the tip credit for restaurant and service employees who customarily receive tips.

The new law makes no change in that provision, which is currently $3.63 per hour, provided the employee receives at least enough in tips to meet the regular minimum-wage figure. There also is an exception for employees under 18 as a training wage. In addition, agricultural workers are excluded from the legislation.

Governor’s Response

The big question is whether Governor Larry Hogan will sign the legislation into law. He earlier said a $15 minimum wage is too high and will disadvantage Maryland employers since the minimum wage in surrounding states is 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. The only local jurisdiction with a comparable wage rate is the District of Columbia, which is currently $13.25 per hour, with scheduled increases to $15 by July 2020.

Hogan had proposed increasing the minimum wage from $10.10 per hour to $12.10 per hour over a 2-year period, with further increases possible if the surrounding states also increased their wages. In light of the General Assembly’s action, however, Hogan’s proposal is not likely to have any effect.

Once the legislation is presented to Hogan, he has 6 days to sign or veto it. The legislation also can become law if he takes no action during that period. The minimum wage increase passed both the House of Delegates and the Senate by margins wide enough to override a veto.

Bottom Line

With the passage of the minimum wage rate increase, Maryland becomes one of the first states leading the charge in the “Fight for $15” campaign. While that may amount to a political success for some, time will tell whether 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 a rate hike that, if enacted, will require them to either cut back on employees’ hours, lay off employees, and/or raise the price of services.

Kevin McCormick is an attorney with Whiteford, Taylor & Preston in Baltimore and an editor of Maryland Employment Law Letter. You can reach him at kmccormick@wptlaw.com.