Minimum Wage: Minnesota

Minimum Wage requirements for other states

Federal law and guidance on this subject should be reviewed together with this section.

Author: Dorraine Larison, Gray Plant Mooty

Author: Michael Cardman, XpertHR Legal Editor

Summary

  • The minimum wage rate in Minnesota varies depending on the size of the employer. See Minimum Wage.
  • Employers may make deductions from employees' wages for certain expenses, as long as the deductions do not reduce their wages below the minimum wage. See Deductions Above the Minimum Wage.
  • Employers may make deductions from employees' wages for child support, board and lodging, union dues, insurance contributions and certain other expenses, even if the deductions bring their wages below the minimum wage. See Deductions Below the Minimum Wage.
  • Employers may not count gratuities toward the payment of the minimum wage. See Tip Credit.
  • Certain employees may be paid less than the minimum wage under certain circumstances. See Subminimum Wages.
  • Localities including Minneapolis and St. Paul have requirements pertaining to the minimum wage. See Local Requirements.

Minimum Wage

The minimum wage in Minnesota is currently $9.65 per hour for large employers and $7.87 per hour for small employers. Large employers are defined as those that are covered by the Minnesota Fair Labor Standards Act and have an annual gross volume of sales made or business done of at least $500,000 (exclusive of excise taxes at the retail level that are separately stated).

On January 1 of every year, the minimum wage rates will be increased by the lesser of:

  • 2.5 percent, rounded to the nearest cent; or
  • The percentage increase in the rate of inflation, as measured by the implicit price deflator, national data for personal consumption expenditures as determined by the United States Department of Commerce, Bureau of Economic Analysis during the 12-month period immediately preceding August 31 of the previous year, rounded to the nearest cent.

The next annual inflation adjustment is scheduled for January 1, 2019, on which date the minimum wage for large employers will increase to $9.86 and the minimum wage for small employers will increase to $8.04.

The Commissioner of the Minnesota Department of Labor and Industry can suspend the increase if projections indicate the potential for a substantial downturn in the state's economy.

+Minn. Stat. § 177.24.

Deductions Above the Minimum Wage

Employers may make deductions from an employee's wages or gratuities, as long as the deductions do not reduce the wages below the minimum wage, for the following expenses:

  • Purchased or rented uniforms or specially designed clothing that is not generally appropriate for use except for employment;
  • Purchased or rented equipment, except for tools of the trade, a motor vehicle, or any other equipment that may be used outside the employment;
  • Consumable supplies required in the course of employment; and
  • Travel expenses in the course of employment, except for those incurred in traveling from the employee's residence and place of employment.

+Minn. Stat. § 177.24.

Deductions for uniforms or equipment may not exceed $50, with the exception of licensed motor vehicle dealers, which may deduct for uniforms or equipment on an ongoing basis, not to exceed the lesser of 50 percent of the dealer's reasonable expense or $25 per month.

Employers are required to reimburse employees for deductions made for the items listed above at the employee's termination, except for deductions made by a motor vehicle dealer for uniforms or clothing.

Employers may require employees to surrender any items provided to the employee when the reimbursement is made. Employers may not, however, hold the employee's last paycheck if the employee does not return the items.

Employers are prohibited from making deductions from minimum wage for the following items:

  • Shortages in money receipts or merchandise;
  • Nonhome maintenance of uniforms;
  • Spoilage;
  • Breakage or other damage;
  • Cash shortages or losses resulting from omissions or other errors;
  • Walkouts;
  • Bad checks;
  • Bad credit slips;
  • Missing guest checks;
  • Robbery; and
  • Fines for disciplinary purposes.

+Minn. R. 5200.0090.

Deductions for Lost, Stolen or Damaged Property and for Employee Debts

Employers may make deductions from an employee's wages for lost, stolen or damaged property, or to recover any amount owed by the employer to the employee, only if the employee voluntarily authorizes the employer in writing to make the deduction after the loss has occurred or if the employee is found liable by a court for the indebtedness. The written agreement must set forth the amount to be deducted and the deduction must be limited to the amount subject to garnishment.

These rules do not apply to:

  • Independent contractors;
  • Cases in which a contrary provision exists in a collective bargaining agreement;
  • Rules that are established for commissioned salespeople and used for discipline in cases in which errors or omissions exist in the performance of their duties; and
  • Cases in which an employee voluntarily authorizes in writing that the cost of a purchase of a loan will be deducted, as long as the authorization occurs before the purchase or loan.

+Minn. Stat. 181.79.

The aforementioned restrictions on deductions apply to gratuities as well as hourly pay. They apply regardless of whether the deductions cause an employee's wages to fall below the minimum wage. Karl v. Uptown Drink, LLC, +835 N.W.2d 14, 18 (Minn. 2013).

Wage Garnishments

In Minnesota, the maximum amount that may be garnished in any workweek or pay period, regardless of the number of garnishment orders received by an employer, is the lesser of:

  • 25 percent of the employee's "disposable earnings"; or
  • The amount by which the employee's "disposable earnings" exceed 40 times the federal minimum wage, times the number of workweeks in the pay period.

+Minn. Stat. § 571.922.

Disposable earnings mean the earnings remaining after the deduction for amounts required by law. +Minn. Stat. § 571.921(b). Generally, this means gross earnings less the required state and federal income tax withholdings and FICA/FIMD.

Deductions Below the Minimum Wage

Minnesota employers may make deductions from wages that will reduce the employee's wages below the minimum wage in various circumstances.

Child Support

Minnesota garnishment statutes allow deductions from wages for child support as follows:

  • 50 percent of disposable income if the employee is supporting a spouse or dependent child and the judgment is 12 weeks old or less;
  • 55 percent of disposable income if the employee is supporting a spouse or dependent child and the judgment is more than 12 weeks old;
  • 60 percent of disposable income if the employee is not supporting a spouse or dependent child and the judgment is 12 weeks old or less; and
  • 65 percent of disposable income if the employee is not supporting a spouse or dependent child and the judgment is more than 12 weeks old.

For child support garnishments, the age of the judgment is calculated to the beginning of the workweek in which the execution levy is received.

With Written Authorization From the Employee

Employers are allowed to deduct the following items from an employee's wages if the employee provides written authorization:

  • Union dues;
  • Certain insurance premiums;
  • Group annuities;
  • Contributions to credit unions, community chest funds, local arts and science councils, Minnesota benefit associations or federal or state registered political action committees; and
  • Participation in any employee stock purchase plan or savings plan for longer than 60 days.

+Minn. Stat. § 181.06.

Board and Lodging

A credit of 60 percent of the minimum wage for one hour of work may be made for each meal the employer provides to an employee, provided that the employee accepts the meal.

The employer cannot require the employee to accept the meal and the meal must be consistent with the employee's work shift. +Minn. R. 5200.0060.

A credit of 75 percent of the minimum wage for one hour of work per day may be made for lodging accepted by an employee or required by the employer as a condition of employment.

The lodging must be adequate, decent, and sanitary. Lodging that is the employee's chief place of residence may be credited toward the minimum wage of that employee at the rate of the fair market value of the lodging.

The tenancy must be evidenced by a written or oral lease agreement providing for at least a month-to-month tenancy. The residence must include a self-contained bathroom and kitchen facilities.

If more than one employee shares the residence, the lodging allowance for the total number of employees sharing the residence may not exceed the fair market value of the residence.

If the employee is employed on a seasonal basis, the maximum lodging credit is 75 percent of the minimum wage for one hour of work per day. +Minn. R. 5200.0070.

Tip Credit

Employers may not directly or indirectly count gratuities toward payment of the minimum wage under either the state Fair Labor Standards Act or federal law. +Minn. Stat. § 177.24(1a). However, voluntary tip pools are permitted.

Coverage/Definitions

Gratuities means monetary contributions received directly or indirectly by an employee from a guest, patron or customer for services rendered. The term includes an obligatory charge assessed to customers, guests or patrons that:

  • Might reasonably be construed by the guest, customer or patron as being a payment for personal services rendered by an employee; and
  • For which no clear and conspicuous notice (meaning a notice clearly printed, stamped or written in bold type on the menu, placard, the front of the statement of charges or other printed material given to the customer in at least 18-point type on the placard or at least 9-point type on all other notices) is given by the employer that the charge is not the property of the employee.

This includes, but is not limited to, service charges, tips, gratuities and/or surcharges that are included in the statement of charges given to the customer.

A direct service employee performs direct service for a customer and is to be considered a tipped employee. An indirect service employee is a person who assists a direct service employee; this term includes, but is not limited to, bus people, dishwashers, cooks or hosts.

+Minn. Stat. § 177.23; +Minn. R. 5200.0080.

Credit Cards

If a gratuity is presented via a credit card, the full amount of the gratuity must be given to the employee minus only the percentage deducted from the tip in the same ratio as the amount deducted from the total bill by the credit card service company. +Minn. R. 5200.0080.

Tip Pools

Any gratuity received by an employee or deposited in or about a place of business for personal services rendered by an employee is the sole property of the employee. Employers may not require employees to contribute or share a gratuity received by the employee with the employer or other employees. However, employees may voluntarily share gratuities with other employees as long as it is done without employer coercion or participation except that employers may:

  • Safeguard gratuities to be shared by employees and disburse the shared gratuities, if requested by the employees;
  • Report the amounts received for tax purposes; and
  • Post a copy of the statute for the information of employees.

When more than one direct service employee provides direct service to a customer in a given situation such as banquets, cocktail and food service combinations, or other combinations, money presented by customers, guests or patrons as a gratuity and divided among the direct service employees is not a violation of the Minnesota Fair Labor Standards Act.

+Minn. Stat. § 177.23; +Minn. R. 5200.0080.

Subminimum Wages

An employer may pay the following employees a subminimum wage of $7.87 per hour:

  • Employees under 18 years of age;
  • Employees under 20 years of age during the first 90 days of employment; and
  • Employees working under authority of a summer work travel exchange visitor program (J) nonimmigrant visa and working under a contract that includes the provision by the employer of a food or lodging benefit (only for hotels, motels, lodging establishments or resorts, as defined under +Minn. Stat. § 157.15).

An employer may not take any action to displace such employees, including a partial displacement through a reduction in hours, wages, or employment benefits, in order to hire employees at these wages. On January 1 of each year, the subminimum wages are adjusted for inflation, as described above. The next subminimum wages increase is scheduled for January 1, 2019, on which date the subminimum wages will increase to $8.04.

+Minn. Stat. § 177.24.

Communications in Postings Required by Minnesota Law

Minnesota requires a poster relating to the minimum wage and other requirements. +Minn. Stat. § 177.31.

Local Requirements

Minneapolis Minmium Wage

A covered employer in Minneapolis must pay employees a minimum wage for each hour worked within the geographic boundaries of Minneapolis.

Minneapolis Employee

Minneapolis's minimum wage ordinance defines employee as having the meaning given under state law, so the minimum wage exemptions under state law apply. +Minneapolis, Minnesota Code of Ordinances Sec. 40.330.

Employees who are typically based outside the city and who perform work in the city on an occasional basis are covered if in a particular week they perform at least two hours of work for an employer within the geographic boundaries of the city. Time spent in the city solely for the purpose of travelling through the city from a point of origin outside the city to a destination outside the city, with no employment-related or commercial stops in the city, except for refueling or the employee's personal meals or errands, is not covered. +Minneapolis, Minnesota Code of Ordinances Sec. 40.370.

Minneapolis Employer

The minimum wage in Minneapolis varies depending on an employer's size, with separate rates for large businesses with 101 or more employees and small businesses with 100 or fewer employees. An employer's business size for the current calendar year is based on the average number of employees who worked for compensation per week during the previous calendar year - regardless of whether they worked on a full-time, part-time, joint, or temporary basis, and regardless of whether they worked in Minneapolis. For a new business, the employer's business size for the current calendar year is based on the average number of employees who worked for compensation per week during the first 90 days after its first employee began work. Any establishment operated pursuant to a franchise (as defined in +Minn. Stat. § 80C.01), where the franchisor and franchisees of such franchisor own or operate an aggregate of more than 10 locations nationally, will be considered a large business. However, any full-service restaurant location in Minneapolis with fewer than 10 locations nationally will be treated as a unique employer solely for the purposes of determining business size. +Minneapolis, Minnesota Code of Ordinances Sec. 40.380.

Scheduled Increases

The minimum wage will gradually increase according to the following schedule:

Date 101 or More Employees 100 or Fewer Employees
Current $11.25 $10.25
July 1, 2019 $12.25 $11.00
July 1, 2020 $13.25 $11.75
July 1, 2021 $14.25 $12.50
July 1, 2022 $15.00 $13.50
January 1, 2023 Adjusted for inflation (Remains $13.50)
July 1, 2023 (Remains at January 1, 2023, rate) $14.50
January 1, 2024 Adjusted for inflation (Remains $14.50)
July 1, 2024 (Remains at January 1, 2024, rate) Same as the January 1, 2024, rate for large businesses
January 1, 2025 (and every January 1 thereafter) Adjusted for inflation

On January 1, 2023, the minimum wage rate for large businesses will be adjusted for inflation based on the percentage increase calculated by the state labor department for purposes of the state minimum wage divided by two and rounded to the nearest cent. On January 1, 2024, and on January 1 every year thereafter, the minimum wage rate for large businesses will be adjusted for inflation based on the full percentage increase calculated by the state labor department for purposes of the state minimum wage rounded to the nearest cent. Beginning July 1, 2024, the adjusted minimum wage rate for large businesses will apply to all businesses. The minimum wage rate cannot be reduced. +Minneapolis, Minnesota Code of Ordinances Sec. 40.390.

Tip Credit

As with state law, Minneapolis prohibits employers from using gratuities towards payment of the minimum wage. +Minneapolis, Minnesota Code of Ordinances Sec. 40.400.

Subminimum Wages

An employer may pay a subminimum wage of 85% of the applicable minimum wage rate, rounded up to the nearest five cents, to employees under the age of 20 who are employed in a city-approved training or apprenticeship program during the first 90 days of their employment. +Minneapolis, Minnesota Code of Ordinances Sec. 40.390.

Communications in Postings Required by Minneapolis Law

Minneapolis requires a poster relating to the minimum wage and other requirements. +Minneapolis, Minnesota Code of Ordinances Sec. 40.420.

Minneapolis Paid Sick Leave Ordinance

The Minneapolis Sick and Safe Time Ordinance includes several requirements that touch on issues relating to the minimum wage, in particular provisions concerning compensation and benefits during leave. For more information about this and other aspects of the ordinance, see Other Leaves: Minnesota.

St. Paul Minimum Wage

Starting in 2020, a covered employer in St. Paul must pay employees a minimum wage for each hour worked within the geographic boundaries of St. Paul.

St. Paul Employee

St. Paul's minimum wage ordinance defines employee as having the meaning given under state law, so the minimum wage exemptions under state law apply. An employee does not include:

  • Employees classified as extended employment program workers (as defined in +Minn. R. 3300.2005 subpart 18) and participating in the extended employment program under +Minn. Stat. § 268A.15;
  • Persons with disabilities receiving home and community-based services identified in +Minn. Stat. § 245D.03(1)(c);
  • Independent contractors; and
  • Baseball players who are part of an independent baseball league, as long as they are compensated under a negotiated contract and appear on the roster of the baseball team.

St. Paul, Minnesota Code of Ordinances Sec. 224.01, as created by Ordinance 18-54.

Employees who are typically based outside St. Paul and who perform work in St. Paul on an occasional basis are covered if in a particular week they perform at least two hours of work for an employer within the geographic boundaries of St. Paul. St. Paul, Minnesota Code of Ordinances Sec. 224.02, as created by Ordinance 18-54.

St. Paul Employer

An employer in St. Paul means means any individual, partnership, association, corporation business trust, or any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee. An employer does not include:

  • The US government;
  • The Minnesota government;
  • Any county or local government, except the city; or
  • Providers with certificates issued by the US Department of Labor (DOL) or the Minnesota Department of Labor and Industry for purposes of subminimum wage payments pursuant to +Minn. Stat. § 177.28. and +Minn. R. 5200.0030, but only to the extent of the workers specifically covered by the subminimum wage certificate.

The minimum wage in St. Paul varies depending on an employer's size. Employers are categorized as either:

  • Macro Businesses that employ 10,001 or more persons;
  • Large Businesses that employ between 101 and 10,000 persons;
  • Small Businesses that employ between six and 100 persons; or
  • Micro Businesses that employ five or fewer persons.

An employer's business size for the current calendar year is based on the average number employees per week during the previous calendar year. For a new business, the employer's business size for the current calendar year is based on the average number employees per week during the first 90 days after the first person working for compensation began work.

In determining the number of employees, all employees on a full-time, part-time, joint, or temporary basis are counted, regardless of whether or not they work in St. Paul. Franchises (as defined in +Minn. Stat. § 80C.01) are classified based on the total number of employees at all franchise locations owned and operated by a single franchisee; each full-service restaurant location within the geographic boundaries of St. Paul and with fewer than 10 locations nationally must be treated as a unique employer solely for the purposes of determining business size.

St. Paul, Minnesota Code of Ordinances Sec. 224.01 and St. Paul, Minnesota Code of Ordinances Sec. 224.05, as created by Ordinance 18-54.

Scheduled Increases

The minimum wage in St. Paul will increase according to the following schedule:

Date Macro Businesses Large Businesses Small Businesses Micro Businesses
January 1, 2020 $12.50 N/A (state minimum wage applies) N/A (state minimum wage applies) N/A (state minimum wage applies)
July 1, 2020 (Remains $12.50) $11.50 $10.00 $9.25
July 1, 2021 (Remains $12.50) $12.50 $11.00 $10.00
July 1, 2022 $15.00 $13.50 $12.00 $10.75
January 1, 2023 Adjusted for inflation (Remains $13.50) (Remains $12.00) (Remains $10.75)
July 1, 2023 (Remains at January 1, 2023, rate) $15.00 $13.00 $11.50
January 1, 2024 Adjusted for inflation (Remains $15.00) (Remains $13.00) (Remains $11.50)
July 1, 2024 (Remains at January 1, 2024, rate) (Same as Macro Businesses) $14.00 $12.25
January 1, 2025 Adjusted for inflation (Remains $14.00) (Remains $12.25)
July 1, 2025 (Remains at January 1, 2025, rate) $15.00 $13.25
January 1, 2026 Adjusted for inflation (Remains $15.00) (Remains $13.25)
July 1, 2026 (Remains at January 1, 2026, rate) (Same as Macro Businesses) $14.25
January 1, 2027 Adjusted for inflation (Remains $14.25)
July 1, 2027 (Remains at January 1, 2027, rate) $15.00
January 1, 2028 Adjusted for inflation (Remains $15.00)
July 1, 2028 (Remains at January 1, 2028, rate) (Same as Macro Businesses)
January 1, 2029 Adjusted for inflation

On January 1, 2023, the minimum wage rate for Macro Businesses will be adjusted for inflation based on the percentage increase calculated by the state labor department for purposes of the state minimum wage divided by two and rounded to the nearest cent. On January 1, 2024, and on January 1 of every year thereafter, the minimum wage rate for Macro Businesses will be adjusted for inflation based on the full percentage increase calculated by the state labor department for purposes of the state minimum wage rounded to the nearest cent. The adjusted minimum wage for Macro Businesses applies to Large Businesses effective July 1, 2024; to Small Businesses effective July 1, 2026; and to Micro Businesses effective July 1, 2028. St. Paul, Minnesota Code of Ordinances Sec. 224.03, as created by Ordinance 18-54.

Tip Credit

As with state law, St. Paul prohibits employers from applying gratuities towards payment of the minimum wage. St. Paul, Minnesota Code of Ordinances Sec. 224.04, as created by Ordinance 18-54.

Subminimum Wages

St. Paul provides for the following subminimum wages:

  • City-Approved Youth-Focused Training or Apprenticeship Programs: An employer may pay an employee under the age of 20 who is employed in a city-approved youth-focused training or apprenticeship program 85% of St. Paul minimum wage for small employers rounded up to the nearest nickel.
  • Youth Wage: Employees who are 14 to 17 years of age may be paid 85% of the St. Paul minimum wage for small employers rounded up to the nearest nickel during their first 90 days after the date of hire. After more than 90 days after the date of hire, such youths must be paid the applicable St. Paul minimum wage.

St. Paul, Minnesota Code of Ordinances Sec. 224.04, as created by Ordinance 18-54.

Communications in Postings Required by St. Paul Law

St. Paul requires a poster relating to the minimum wage. St. Paul, Minnesota Code of Ordinances Sec. 224.08, as created by Ordinance 18-54.

St. Paul Paid Sick Leave Ordinance

The St. Paul Earned Sick and Safe Time (ESST) Ordinance includes several requirements that touch on issues relating to the minimum wage, in particular provisions concerning compensation and benefits during leave. For more information about these and other aspects of the St. Paul ESST Ordinance, see Other Leaves: Minnesota.

Future Developments

There are no developments to report at this time. Continue to check XpertHR regularly for the latest information on this and other topics.