Will Ohio Voters Increase the Minimum Wage?
On October 13, 2015, Stand Up Ohio, a coalition of community, labor, civil rights, and environmental groups, presented a ballot initiative to the Ohio Attorney General to increase Ohio’s minimum wage. In addition to increasing the minimum wage, the ballot initiative also proposes to change Ohio’s wage and hour law in connection with how tipped employees can be paid. The Ohio Ballot Board must now approve the initiative, and then supporters must collect approximately 300,000 signatures in order for the ballot to be placed on the 2016 ballot for voters to decide.
The Push for a “Living Wage”
This initiative to amend Ohio’s state minimum wage rate is just one of the many proposals by states and municipalities around the country to raise the minimum wage to what many refer to as a “living wage.” When using this term, most people are generally referring to a minimum wage rate that can help lift low wage workers out of poverty. The idea is that full-time minimum wage workers should be able to afford basic life necessities without having to work two or three jobs, or having to apply for government assistance. How is a “living wage” determined? There is no global definition of what constitutes a living wage. However, some institutions, including the Massachusetts Institute of Technology (“MIT”), have created living wage calculators that calculate the income necessary to meet basic needs by calculating the annual income that will cover the cost of living in a particular area. Typical expenses include housing, food, child care, medical, and transportation. Because not all of these costs are the same in all parts of the country, a living wage can vary from state to state and city to city.
Other states that will decide the question of whether the minimum wage should be increased include California, Florida, Maine, Alabama, and Oregon. Also, in Ohio, some cities already have living wage ordinances; for example, Cleveland, Dayton, Cincinnati, Lakewood, and Toledo. Further, without the government telling them they have to, some companies have decided on their own to pay a higher “living wage” to their otherwise lower-wage employees. Companies like IKEA, Costco, Gap, and Trader Joes have all been in the national news because of their decision to pay employees more than what federal and/or state law otherwise require them to pay. IKEA stands out among the crowd because it is actually utilizing MIT’s “living wage” calculator to determine what the minimum wage should be for its employees based on where they live.
Ohio’s Current Law
Currently, minimum wage under Ohio law is $8.10 per hour. Also, an employer may pay tipped employees less than, but not less than half, the state minimum wage rate if the employer is able to demonstrate that the employees receive tips that, combined with the wages paid by the employer, are equal to or greater than the minimum wage rate for all hours worked. This means that the employer must pay a tipped employee at least $4.05 per hour and the remainder of the employee’s hourly rate can be made up in tips. However, if the employee does not make enough in tips, the employer must pay the difference to ensure the employee earns no less than the minimum wage.
The Ballot Initiative
Below is a summary of the changes the ballot initiative proposes:
- Amend Article II, Section 34a of the Ohio Constitution which establishes a state minimum wage rate.
- Increase Ohio minimum wage to $10.00 per hour on January 1, 2017. The minimum wage will then increase by 50 cents on January 1st of each following year until it reaches $12 per hour in 2021. After that it will be annually adjusted for inflation consistent with existing law.
- Change existing law, which allows employers to pay tipped employees half of the full minimum wage when the employees earn the full minimum wage when tips are included, to require employers to pay tipped employees at least $6.00 per hour beginning January 1, 2017 when employees earn the full minimum wage when tips are included.
- The amount employers must pay tipped employees will be increased by $1 per hour every following January 1st until the wage paid to tipped employees by their employer matches the full minimum wage.
- If the wage paid to tipped employees by an employer requires an annual increase of less than $1 per hour to match the full minimum wage, the annual increase will only be for the amount required to match the full minimum wage.
- Once the amount paid by the employer equals the full minimum wage, it will increase every January 1st based on the rate of inflation consistent with existing law.
Ohio employers are advised to stay abreast of the ballot initiative and, if it passes, to comply with the new minimum wage and tipped employee compensation requirements starting January 1, 2017.