A Bowles Rice attorney says the Legislature’s bill to increase West Virginia’s minimum wage has unintended consequences for most state employers.
Brian Peterson, of the law firm’s Martinsburg office, said Tuesday House Bill 4283 not only raises the minimum wage, but also requires employers with six or more employees to comply with additional overtime regulations.
The quirk has to do with the way the Legislature updated state code to make the new minimum wage rates applicable to most workers and not just state employees.
To do so, the Legislature changed the definition of “employer” for the portion of state code that addresses the minimum wage. However, that section — chapter 21, article 5C — not only deals with minimum wage regulations, but also state overtime, or maximum hours, regulations.
When they redefined the kinds of employers that have to pay state minimum wage, the Legislature also redefined which employers must abide by state overtime rules, Peterson said.
“Most employers never had to worry about complying with state law for minimum wage or maximum hours,” Peterson said. “This year the Legislature wanted to raise the minimum wage for all or nearly all West Virginians who currently receive it. To accomplish that goal they had to amend not only section two, the minimum wage section (of code), but also the definition section, section one. Otherwise, (the increase) would have only been effective for state employees.”
Peterson said the definition of “employer” had to be amended because the minimum wage wouldn’t have applied to most employers under the previous definition.
The current law excludes businesses from complying with state overtime regulations if 80 percent of employees can be covered by federal minimum wage standards — which means the federal rule applies to just about everyone.
But Peterson contends the Legislature changed that rule so that virtually all employers with six or more employees are subject to more stringent state overtime regulations.
“The federal law doesn’t pre-empt state law,” Peterson said. “Whichever law provides the most generous benefit to employees is the one that controls. If an employee is exempt from overtime requirements in federal law and that same exemption doesn’t exist under state law, that employee is still subject to overtime under state law.”
Peterson said he thinks most lawmakers didn’t realize they were voting for a change in overtime regulations. The bill itself doesn’t say anything about expanding overtime rules.
However, the West Virginia Center on Budget and Policy — which supported the minimum wage increase — disagreed with Peterson’s interpretation. Ted Boettner, the center’s executive director, said the so-called “flaws” Peterson pointed out are actually good for West Virginia workers.
“The bad news is that lobbyists who opposed increasing the state’s minimum wage may use this as ammo to get Gov. (Earl Ray) Tomblin to veto the bill,” Boettner wrote in a Tuesday blog post.
The blog post linked a memo from the National Employment Law Project, dated March 24, that outlines problems with Peterson’s reasoning.
According to that document, West Virginia’s current minimum wage and overtime laws exclude most employees from coverage.
“To our knowledge, no other state defines its minimum wage law to effectively exclude most employers from coverage,” according to the memo. “Thus, extending West Virginia’s minimum wage and overtime requirements to employers in the state is common sense — it simply means that the state law will actually cover all employers in the state — the whole purpose of having a state minimum wage law in the first place.”
The memo also contends state minimum wage laws are generally more protective than the federal version. The federal law is meant to be a “floor,” according to the memo, and encourages states to offer higher minimum wages than the federal level. As a result, many states have stronger worker provisions than the federal law including fewer exemptions, higher wages, longer statutes of limitations for workers to bring claims, higher penalties and liquidated damages and coverage of smaller employers.
But Peterson argues the new law would make West Virginia less attractive to business. He also said businesses would be more likely to reduce full-time employees to part-time status and hire more workers to make up the difference in order to avoid paying overtime.
“One way to avoid overtime would be to hire more workers,” Peterson said. “That is a possibility.”
It will take vigilance on the employers’ part to ensure the business complies with new changes, Peterson said.
Boettner said Tomblin should discount Peterson’s arguments and sign the bill to help working families. The bill would increase the minimum wage $1.50 over three years, beginning Jan. 1. However, the overtime regulations would go into effect much sooner, on June 6.
“The Governor should not use this fundamentally flawed memo to deny a much needed raise to over 125,000 hard working families,” Boettner said. “If there are any small technical issues with the bill, these could easily be worked out during the Legislature rules process. We should not throw out the baby with the bathwater.”
House Bill 4283 has not yet been reported to the governor. Once it is, he will have 15 days to either sign or veto it.