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April 4, 2005Client Alert

New Minimums for Minimum Wage Laws: Recent City, State and Federal Challenges to $5.15/Hour

The federal minimum wage has been set at $5.15 an hour for almost a decade, and, based on two recent Senate votes, it seems unlikely that it will increase during the current two-year Congressional term.  On March 7, 2005, the United States Senate defeated two different proposals to raise the federal minimum wage over the course of the next few years.

The first proposal, backed by Senate Democrats, included minimum wage increases in three steps of 70 cents each over the next 26 months.  Thus, this proposal would have enhanced the federal minimum wage to $7.25 an hour by 2007.  The second proposal, endorsed by Senate Republicans, would have increased the federal minimum wage in two 55-cent steps over the next 18 months, bringing the minimum wage up to $6.25 by mid-2006.  Although neither proposal garnered the 60 votes needed to pass through the Senate, the minimum wage debate has been mirrored by lawmakers at both state and municipal levels.

As noted above, federal law mandates that most workers receive at least $5.15 an hour as wages.  However, a state may set its own minimum wage above this amount.  For example, on January 1, 2005, Illinois became one of approximately a dozen states with a minimum wage rate higher than the federal rate when it increased its minimum wage to $6.50 an hour. 

Wisconsin employers should be on the look-out for a similar state-wide increase.  Last year, an advisory council appointed by Governor Jim Doyle recommended that the Legislature raise the state minimum wage to $6.50 an hour.  Concomitantly, Wisconsin’s Department of Workforce Development ("DWD"), the state agency invested with the authority to increase the state’s minimum wage, has proposed a rule to increase the minimum wage to $5.70 an hour as soon as the rule becomes effective and to $6.50 an hour by October 1, 2005.  Bills both supporting and opposing the DWDs proposed increase have been introduced in the state Assembly and Senate.                         

Undaunted by the legislative process at the federal and state levels, Wisconsin’s two largest cities, Madison and Milwaukee, recently passed municipal ordinances to increase the minimum wage for workers in these cities.  Effective January 1, 2005, Madison’s Minimum Wage Ordinance increased the minimum wage for “employees working in the City of Madison” to $5.70 an hour.  This minimum will rise to $6.50 an hour on January 1, 2006, and $7.25 an hour on January 1, 2007.  Similarly, last month the City of Milwaukee passed its own minimum wage ordinance, which will increase the minimum wage for Milwaukee workers to $5.70 an hour on October 1, 2005, and to $6.50 an hour on October 1, 2006.    

However, these municipal ordinances may have only moved the minimum wage debate from the state’s legislative chambers to its judicial chambers.  According to a coalition of business groups in Madison that is currently challenging the Madison Minimum Wage Ordinance in court, the city exceeded its authority by setting its minimum wage higher than Wisconsin’s.  Therefore, the courts must now decide whether municipalities have the power to set a city-wide minimum wage that is higher than the state’s minimum wage.  A judge has let the increase stand while the matter proceeds to a hearing. 

For more information, or to see if recent developments in this area have occurred, please contact Kristi Nelson Foy at 414.271.6560, or knfoy@michaelbest.com.

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