This is part of a series of articles by Wright Lindsey Jennings’ labor and employment team examining key trends for employers and the workplace in 2019. The series was featured in Arkansas Business.
Arkansans voted in November—by a margin of approximately 68% to 32%—to increase the state’s minimum hourly wage rate by $2.50 over the next three years. This is the second minimum wage increase in Arkansas to pass through a ballot initiative. The existing minimum wage law, approved by voters in 2014, was the first and incrementally increased the minimum hourly wage rate from $6.25 to the current rate of $8.50 over a three-year period.
All employers with four or more employees in Arkansas must comply with the new law, which increases the minimum hourly wage rate to $9.25 on January 1, 2019; to $10 on January 1, 2020; and to $11 on January 1, 2021. Although the federal minimum hourly wage rate will remain at $7.25, 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 the minimum wage of tipped employees, who will continue to have a minimum hourly cash wage of $2.63. (And the employer will still have to pay an employee the difference if the employee’s hourly cash wage plus tips do not equal the applicable minimum wage rate.) Nor does the new law affect any other tip credit requirements. Based on the minimum wage increase schedule, the maximum tip credit allowance that an employer can take will be $6.62 per hour effective January 1, 2019; $7.37 per hour effective January 1, 2020; and $8.37 per hour effective January 1, 2021.
The new minimum wage law is expected to affect around 300,000 workers statewide. Failing to comply with the new law could lead to civil penalties and significantly increases an employer’s litigation exposure. Given that 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, being prepared for the changes in minimum wage can help protect both the employer’s compliance record and bottom line. Here are a few steps an employer can take to prepare:
- Identify all the non-exempt employees who currently make below the new minimum wage rate and make sure that any necessary changes to the company’s payroll system/practices are made before 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 the 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 especially important for those employers who have operational cost-related concerns when it comes to the new minimum wage law. Strategically implementing steps on the frontend to manage the minimum wage increase can alleviate those concerns and ultimately benefit the company in the long run.