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Minnesota Fair Labor Standards Act & Wage Mandates

Issue

Should Minnesota make any changes to its minimum wage, overtime, prevailing wage and wage mandate laws?

Policy

  • Minimum Wage: The Minnesota Chamber supports maintaining our state minimum wage at the federal level. In 2007, federal legislation was passed that will incrementally raise the minimum wage by $2.10 over the next two years. The Chamber opposes any state action that would cause the Minnesota minimum wage to exceed the new federal levels. Finally, the Chamber supports adopting a tip credit provision and prohibiting political subdivisions from establishing their own minimum wage ordinances.
  • Overtime:The Minnesota Chamber supports conforming Minnesota’s overtime law to the new federal regulations. The new regulations are designed to make determinations of when overtime pay is required more predictable and update the law to modern human resources practices. Conforming Minnesota’s law also will eliminate the confusion over which law applies to a particular employee.
  • Prevailing Wage: The Minnesota Chamber supports changing Minnesota’s prevailing wage law so it conforms exactly to the federal Davis Bacon Act. The federal act, among other things, defines the prevailing wage as the wage rate paid to the majority of those employed in a job classification. If there is not a majority paid at the same rate, then the average rate is used. Minnesota ideally would not have a prevailing wage law. The local labor market and competition would determine the wage rates being paid on state-funded construction projects.
  • Wage Mandates: : The Minnesota Chamber supports efforts to achieve greater accountability and oversight of state and local economic development programs. However, we strongly believe that state and local governments should not mandate that businesses pay employees a minimum wage higher than that set in federal law if they receive economic development assistance, business subsidies or have government contracts. Existing laws with such requirements (Minnesota Statutes § 116J.8731 and § 469.176) should be repealed. “Livable wage” mandates are not necessary if state and local economic development agencies negotiate the best deal they can (i.e., as many high-wage jobs as possible) and, once wage and employment goals are set, enforce them through “claw back” provisions.

Business Impact

Most economists agree that the first impact of a higher minimum wage is lower levels of entry-level employment. This will have a negative impact on the business community’s ability to offer low-skilled individuals work opportunities and move people off of welfare. If the minimum wage is increased without a tip credit, it will likely cause employers to either find ways to reduce employment, increase productivity or pass on the increased labor costs to the customer.

At present, it is unclear how the federal and state overtime laws will work together because one feature of the federal Fair Labor Standards Act is that the law more beneficial to employees applies. That is why federal conformity is important. The intent of federal regulations is to lessen businesses’ administrative burden and update the regulations to modern workplace practices. Under the federal regulations, some employers will end up paying more overtime pay and some less. It will depend on the makeup of their workforce.

Reforming the prevailing wage law should reduce costs of state-funded construction projects, benefiting employers along with all taxpayers. Minnesota currently uses the modal method (the most costly method) to calculate the prevailing wage and is one of only two states to do so. Changing Minnesota’s formula to its federal counterpart will enhance competition on state-financed construction projects and thereby save taxpayers money.

“Livable wage” legislation at the state level or policies/ordinances at the local level could force those employers that receive economic development assistance to pay higher wages to their employees. In addition, legislation, policies or ordinances that mandate wage levels could drive up wages for businesses that do not receive assistance, making Minnesota a less attractive place to move, expand or operate a business.

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