Maryland’s Minimum Wage Increase - Is Your Company Compliant?

Maryland is the sixth state to adopt a $15/hour State Minimum Wage for its workforce, behind California, Illinois, Massachusetts, New Jersey, and New York.  And while the increase will be phased into full effect gradually over the next 5-6 years, ensuring compliance requires an understanding of several factors:

Differing Rate Schedules

Beginning January 1, 2020, Maryland’s large and small businesses will be subject to different minimum wage step schedules. Businesses with 15 employees or more will have to adhere to step increases over the next five years, reaching the $15/hour minimum wage in 2025.  Businesses with 14 or fewer employees will see similar incremental increases, though at slightly different rate steps over a six-year period.

Exceptions and Changes

Notable exceptions and changes under the new law include those affecting workers under the age of 18 years, state recreation and amusement workers, and tipped employees.

Employers may hire workers under the age of 18 at a rate equaling at least 85% of the state minimum wage. This is in contrast to Maryland’s previous age guideline of 20 years.

State recreation and amusement workers must now be paid according to the state minimum wage rate.

Tipped employees remain at a minimum rate of $3.63/hour. This wage combined with tip income must meet the state minimum wage.  The important change regarding tipped employees is the requirement of employers to provide a written or electronic statement each pay period.  Statements must show an employee’s hourly rate of pay plus employer-paid cash wages, and also include tips for tip credit hours worked. The statements must be issued each workweek of the pay period. 

Local Jurisdictions

As businesses set payroll, it is critical they know the regulations imposed by their local jurisdiction. Maryland’s $15 minimum wage differs from the $7.25 federal minimum wage, and local jurisdictions may similarly impose their own minimum wage standard varying from that of either state or federal law. 

For instance, Montgomery and Prince George counties already exceed Maryland’s initial increases to minimum wage.  Montgomery’s minimum wage is $12.25/hour for employers of 51 or more employees and $12/hour for smaller businesses. Prince George County mandates a current minimum wage of $11.50/hour. Employers in these counties will have to meet county guidelines while being mindful of meeting the higher state wage when it exceeds the local rate.

Worthy of Close Watch

Maryland’s minimum wage has consistently risen since 2014. The newly legislated increase to $15/hour has fueled concern regarding the potential negative impacts on employment growth in the state. Therefore, Maryland’s Board of Public Works reserves a one-time exemption to suspend any singular scheduled increase during the phase-in period, if deemed necessary.

This provision, coupled with the many additional variables of the law, underscores the importance of paying close attention and remaining informed in years ahead to ensure ongoing compliance with the minimum wage increase.