Volume 6, Issue 5
June 19, 2007
Many Nevada employers are presented with challenges posed by the new federal minimum wage legislation and last year's constitutional amendment raising the state minimum wage.
The new federal minimum wage increases
President Bush recently signed legislation to raise the federal minimum wage from $5.15 per hour to $7.25 per hour over the next 26 months. Raises are incremental, at 70 cents per hour, through 2009, with the first to be effective July 24, 2007.
The federal minimum wage will increase per the following schedule:
1. $5.85 per hour effective July 24, 2007 (sixty (60) days following enactment);
2. $6.55 per hour effective July 24, 2008 (one year following the first increase); and
3. $7.25 per hour effective July 24, 2009 (one year following the second increase).
Nevada's two-tiered minimum wage law increase effective July 1, 2007
Notwithstanding these changes in federal law, Nevada employers must comply with our state's two-tiered minimum wage law that became effective in 2006 with the constitutional amendment. That amendment set the Nevada minimum wage at $5.15 per hour, but raised the rate by $1.00, to $6.15 per hour, if the employer does not offer a qualified health insurance plan as defined in the law.
On April 1, 2007, the Nevada Labor Commission issued its constitutionally-mandated Minimum Wage 2007 Annual Bulletin setting forth the two rate tiers to be effective July 1, 2007 based upon the mandated cost of living calculations. This raised both tiers as follows:
1. $5.30 per hour for employers who offer a qualified health insurance plan. The definition of the qualified plan is at section 4 of the April 10, 2007 Temporary Regulations (link provided below).
2. $6.33 per hour for employers who do not offer a qualified health insurance plan.
What happens with the upper tier of Nevada rate on July 24, 2007 when the federal rate rises?
For employers who do not offer a qualified health insurance plan (as defined in the Temporary Regulations), there is some question as to how high the upper tier rate will go. The minimum wage amendment provides that the Nevada minimum wage is to rise by the amount of increases in the federal minimum wage over $5.15 per hour. Accordingly, it is clear that as of July 24, 2007, the lower tier must increase to $5.85 per hour in recognition of the federal raise.
However, there is some indication that, since the increased federal rates were enacted and will become effective after the issuance of the Nevada's Annual Bulletin, the Labor Commissioner, based upon an Attorney General's opinion, does not believe the upper tier of the Nevada minimum wage should go above the $6.33 rate set out in the Annual Bulletin. However, we await a formal ruling from the Labor Commission as to employees in the upper tier.
Employee Notice Required
Nevada's law requires that employers provide written notification of the rate adjustments to each employee, and be prepared to make the adjustments by July 1, 2007.
It is very clear that, through 2009, the Nevada minimum wage will be calculated per the amendment, with employers notified each year. Employers should be prepared to pay, at a minimum, the applicable federal minimum wage rate and await publication of the Labor Commissioner's Minimum Wage Annual Bulletin each April 1st.
Nevada's Temporary Regulations
The Nevada Labor Commissioner issued Temporary Regulations pertaining to the state's new two tier minimum wage structure which are effective from April 10, 2007 through November 1, 2007. These regulations will be replaced by yet to be disclosed permanent regulations. Please note that the current Temporary Regulations supersede the Emergency Regulations outlined in the December 22, 2006 KZA Employer Report. The link to the Labor Commissioner's current Temporary Regulations can be found by clicking here.
Recommendations for Compliance
Employers should immediately prepare for compliance. Some suggestions include:
1. Evaluate the pay practices for employees making near the new minimum wage rates, and make changes where needed in the rates applicable. Attention should be paid to the employee cost of the health insurance and the specific coverages and the employee's annual compensation, upon which turns the applicable minimum wage rate under the Temporary Regulations.
2. On July 1, 2007, raise rates for covered employees to the Nevada two-tiered rates.
3. On July 24, 2007, raise the pay of covered employees (those at the lower tier) to the federal rate of $5.85 per hour.
4. Await issuance of further word from the Labor Commission as to the upper tier employees' rate as of July 24, 2007.
5. Because of the requirement for daily overtime (NRS 608.018), and the Labor Commissioner's opinion that this is impacted by the constitutional wage amendment, employers should review each employee who makes less than $10.27 per hour in order to determine whether the employee was offered a qualifying health plan.
6. Prepare and provide written notice of the changes in the wage rates. The constitutional amendment does not specify a time deadline, except that both the notice and the wage changes must take place by July 1, 2007.
Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.