Complying with Arkansas’ New Minimum Wage Law

Given that it’s already mid-February, companies with four or more employees in Arkansas presumably have taken the necessary steps to ensure that they are in compliance with the new minimum wage law—which increased the state minimum hourly wage rate from $8.50 to $9.25 on January 1st. Under the new law, which was passed in the November election by nearly 70 percent of Arkansas voters, the minimum hourly wage rate will increase to $10 on January 1, 2020, and to $11 on January 1, 2021. The federal minimum hourly wage rate will remain at $7.25; however, employers generally are required to apply the rate most generous to the employee when federal and state laws have different minimum wage requirements (i.e., the higher of the two rates).

For those employers with tipped employees, the new law does not affect any state tip credit requirements, including the minimum wage of tipped employees who will continue to have a minimum hourly cash wage of $2.63. (And employers still have to pay tipped employees the difference if an employee’s hourly cash wage plus tips do not equal the applicable minimum wage rate.) Based on the minimum wage increase schedule, the maximum tip credit allowance that an employer can take is $6.62 per hour as of January 1, 2019; $7.37 per hour effective January 1, 2020; and $8.37 per hour effective January 1, 2021.

Some employers may be keeping a close eye on Senate Bill 115, the proposed legislation introduced last month that would exempt from the new minimum wage law all (1) employees under the age of 18, and (2) schools, nonprofit organizations and businesses with fewer than 50 employees. The future of SB 115 is uncertain, as it did not have the votes to advance in its current form and will have to be amended and re-introduced, if re-introduced at all. In other words, employers should not hold off on complying with the new minimum wage law in hopes of SB 115’s passage—especially considering that failing to comply with the new law could lead to civil penalties and significantly increases an employer’s litigation exposure.

A successful plaintiff in a wage and hour lawsuit may recover the full amount of unpaid wages plus attorneys’ fees and costs, as well as an additional amount equal to twice the award of unpaid wages. Preparing for and ensuring compliance with minimum wage changes can ultimately help protect the employer’s bottom line. Here are a few steps an employer can take to prepare:

• Identify all the non-exempt employees who make below the new minimum wage rate and make sure that any necessary changes to the company’s payroll system/practices are made, preferably well in advance of the new rate’s effective date. (While under no legal obligation to do so, some employers may want to consider increasing the wages of employees who already meet or exceed the new minimum hourly wage rate to maintain internal pay scale consistency, for the sake of employee morale, etc.)
• Replace any existing minimum wage notice with the most up-to-date version, which is available for download on the Arkansas Department of Labor’s website. (Any employer with four or more employees in Arkansas is required to post the minimum wage notice in a conspicuous place for all employees.)
• Train human resources, payroll and managerial employees on upcoming minimum wage increases, the minimum wage notice posting requirement and how to respond to employee questions regarding wage rate changes.
• Determine whether certain work processes can be performed more efficiently or if any redundant work activities can be eliminated and consider using technology to streamline certain functions (such as an integrated timekeeping and payroll system) to improve productivity and reduce operating expenses, all of which may help minimize the impact of a minimum wage increase.

Taking the time to plan ahead is particularly important for those employers who have operational cost-related concerns when it comes to the new minimum wage law. Strategically implementing steps on the front end to manage the minimum wage increase can alleviate those concerns and benefit the company in the long run.