—Overview—
On Feb. 4, 2019, Gov. Phil Murphy signed A-15, which set New Jersey on the path to raise the minimum wage in increments to $15 an hour by 2024. The law raised the minimum wage to $10 per hour on July 1, 2019 and then to $11 per hour on Jan. 1, 2020. Currently, the minimum wage is set to increase $1 every year until reaching $15 per hour in 2024. The minimum wage will increase at a slower rate for small businesses with six or fewer employees, seasonal businesses, and farm labor. The bill also effectively increased tipped workers’ minimum wage rates and increased the training wage. On Aug. 3, 2020 the Department of Labor and Work Force Development issued new rule adoptions. Additionally, the legislature passed legislation which was signed into law on September 16, 2020 changing the minimum wage for direct care staff at long-term care facilities. This Fast Facts helps employers understand when and how these changes are coming, and in what ways they will be affected.
—Background—
Between 2008 and 2016, legislation to increase New Jersey’s minimum wage was introduced five times without success. Three years after former Gov. Chris Christie vetoed the 2016 bill to raise the minimum wage to $15 per hour, a similar bill was signed by Governor Murphy, fulfilling one of his priority campaign promises. New Jersey has joined California, Connecticut, Washington D.C., Illinois, Maryland, Massachusetts, and New York in enacting pathways to a $15 per hour minimum wage.
—General Compliance Information—
When does each wage increase take effect?
Are there exemptions?
As outlined in the table above, the first increase in the regular minimum wage was implemented on July 1, 2019, followed by other exempted wages increasing a year later on Jan. 1, 2020 (along with the creation of the training wage). It is worth noting that the minimum wage will continue to increase based on the Consumer Price Index (CPI). If the CPI increase is higher than the minimum wage, the wage will be increased in conjunction with the CPI. Under the new law, the minimum wage for regular workers will continue to increase by CPI standards beginning in 2025, after the $15 per hour standard is met.
For small employers (defined as having fewer than six employees) and seasonal workers, the minimum wage will increase each year by the same amount as the minimum wage for regular workers, plus one-half of the difference between $15 per hour and the minimum wage in effect on Jan. 1, 2026 for regular workers. Beginning Jan. 1, 2029, the wage rate for small employers and seasonal workers will be the same as that for regular workers.
For farm labor the minimum wage will increase to the greater of $12.50 plus any increase in the CPI or the stipulated wage rate starting Jan. 1, 2025. It will be at least $15 per hour by Jan. 1, 2027. The wage will then increase by the same amount that the regular minimum wage increases by for that year, plus one-third of the difference between $15 per hour and the minimum wage in effect on Jan. 1, 2027 for regular workers. Beginning Jan. 1, 2031, the minimum wage for farm labor will be the same as that for regular workers.
For tipped workers, employers who take the tip credit are required to pay their employees a minimum hourly wage equal to the difference between the regular minimum wage rate and the tip credit taken by the employer. Listed above are the maximum tip credits employers can claim each year, which cannot exceed the value of tips actually earned by employees.
Additionally, legislation (A-4482 / S-2758) signed into law this year sets the minimum wage rate for direct care staff at long-term care facilities at $3 above the prevailing minimum wage rate. That means the minimum wage rate for these workers will be $15, effective January 1, 2021.
Individuals exempt from the minimum wage rates are:
- Full-time students employed by the college or university at which they are enrolled at not less than 85% of the effective minimum wage rate;
- Outside salespersons;
- Salespersons of motor vehicles;
- Part-time employees primarily engaged in the care and tending of children in the home of the employer;
- Minors under 18 (except minors under 18 working in the processing of farm products, hotels, motels, restaurants, retail, beauty culture, laundry, cleaning, dyeing, light manufacturing and apparel occupations);
- Employees at summer camps, conferences and retreats operated by any nonprofit, religious corporation, or association during the months of June, July, August and September.
Is there a training wage?
An employee may be paid the training wage of not less than 90% of the regular minimum wage for the first 120 hours of work in an occupation in which the employee has no previous similar work experience. Training wages can be paid to individuals participating in an established employer on-the-job or other training program, defined as a program that provides the employee an industry-valued training credential or a credit that can be applied to earning an industry-valued training credential.
How are tipped employees defined?
A tipped employee is any employee who customarily and regularly receives more than $30 per month in tips. Any monthly period beginning on the same day can be used, it does not have to be a calendar month. Employees who only sometimes receive over $30 per month in tips, such as during a holiday season, are not considered tipped employees.
Rules for Tipped Employees
Employers of tipped employees must follow these rules:
- Employers cannot use their employees’ tips for any purpose other than for a valid tip pool;
- Tips split by employees are considered tips belonging to the individuals who retain them;
- Compulsory charges for service do not count as tips;
- Employees who perform two jobs at one establishment are only considered tipped employees for the job where they regularly receive $30 per month in tips;
- An employer cannot take the tip credit unless they inform their tipped employees in advance: the amount of the cash wage the employer will pay to the tipped employee; the amount of the tip credit the employer will claim, which cannot exceed the actual value of tips received by the employee; that all tips received by the tipped employee are to be kept by the employee except for pooling arrangements; the tip credit will not apply to an employee who has not be informed of all of these requirements.
How are seasonal employer and seasonal employment defined?
A seasonal employer fits at least one of these definitions:
- An employer which provides services in a continuous period of 10 weeks or less during the months of June, July, August, and September.
- An employer for which at least two-thirds of gross receipts were received in a continuous period of 16 weeks or less during the previous calendar year.
- An employer for which at least 75% of wages paid by the employer during the previous calendar year were paid for work performed during a single calendar quarter.
Seasonal employment is defined as employment by a seasonal employer, or employment by a nonprofit or government entity only between the dates commencing May 1 and ending Sept. 30, excluding farm laborers.
How is small employer defined?
A small employer is a company that employed fewer than six employees for every workday during the majority of workweeks in the current calendar year and fewer than six employees for every workday during at least 48 workweeks in the preceding calendar year. If the business was established last calendar year, the employer must have employed fewer than six employees for every workday of that year, and for each workday during a majority of the workweeks in the current calendar year. If the business was established this calendar year, it must have employed fewer than six employees for every workday for the majority of workweeks in the current calendar year.
—For More Information—
Wage order regulations can be found on the DOLWD website. If you need additional information, please contact NJBIA’s Member Action Center at 1-800-499-4419, ext. 3 or member411@njbia.org.
This information should not be construed as constituting specific legal advice. It is intended to provide general information about this subject and general compliance strategies. For specific legal advice, NJBIA strongly recommends members consult with their attorney.
