Many states, cities adjust minimum wage rates mid-year
Employers must comply with the highest applicable minimum wage, whether federal, state or local. The federal rate is $7.25 per hour, but many states and cities set higher rates that update on January 1 and July 1 each year, including recent increases in Alaska, Washington, D.C., Oregon and California.
The current federal minimum wage is $7.25 per hour. The Fair Labor Standards Act (FLSA) requires employers to pay nonexempt employees at least the minimum wage for all hours they work.
The FLSA and its regulations also define compensable work time, covered employers and employees, situations in which an employer may reduce an employee’s pay below the minimum wage, and notices employers must post in the workplace.
Who is covered under the FLSA?
Virtually all employers are subject to FLSA minimum wage requirements either because the employer is a “covered enterprise” or because its employees engage in interstate commerce. A “covered enterprise” as defined under the FLSA includes:
- All businesses that have $500,000 or more in annual sales or receipts
- Businesses that operate hospitals or residential care facilities for the elderly or people with disabilities
- Schools and government agencies
Can state and local laws set a higher minimum wage?
State laws may require a higher minimum wage than the federal requirement. Municipalities may have higher minimum wage rates, as well.
Local laws may require employers to pay city employees and the employees of companies benefiting from city contracts or subsidies a “living wage” that is greater than the federal minimum wage.
The FLSA does not supersede any state or local laws that are more favorable to employees. If a state has a minimum wage higher than the federal minimum wage, employers subject to the state law are obligated to pay the higher rate to employees working in that state.
Numerous states and localities have increased their minimum wage rates above the federal government’s rate. Movements in many more states, counties and cities are pushing for future increases, and these will likely continue until the federal government raises its rate to a level that satisfies state and local governments.
When do minimum wage rates typically change?
Minimum wage rates are typically adjusted on January 1 and July 1. Several states and municipalities saw adjustments on July 1.
Alaska’s rate increased to $14.00 per hour. Washington, D.C. increased to $18.40 per hour,with the minimum tipped wage rising to $10.30. Oregon’s Portland metro area increased to $16.80, with urban counties rising to $15.55 and rural counties to $14.55.
Local minimum wage ordinances may override state minimum wage rates. Employers are advised to use the higher rate when a local jurisdiction has its own.
Many California cities saw increases on July 1, including Berkeley rising to $19.61, Los Angeles City rising to $18.42, and San Francisco rising to $19.61. California isn’t the only state with cities and municipalities that set their own higher rates.
Certain states and jurisdictions allow employers to take a tip credit, while others do not. With minimum wage increases, states and jurisdictions with tip credits will see adjustments to the minimum tipped wage.
Can states prohibit cities from setting higher minimum wage rates?
A few states have enacted laws prohibiting cities from setting their own minimum wage rates above the state rate. The most recent is Alabama, which precluded a minimum wage rate in Birmingham that would have raised Birmingham’s rate above the state rate.
How do minimum wage increases affect overtime calculations?
Minimum wage increases can affect overtime calculations. With each increase, employers should review their overtime policies and calculations.
Employers should also update the labor law posters required by state and federal law to reflect any new minimum wage rates.
FAQ
What is the federal minimum wage?
The federal minimum wage is $7.25 per hour under the FLSA. States and cities can set higher rates, and employers must pay whichever rate is highest for where an employee works. The FLSA does not override state or local laws that are more favorable to employees.
Do state minimum wage laws override federal law?
No, but the higher rate applies. If a state or local minimum wage exceeds the federal rate, employers subject to that law must pay the higher amount. The FLSA sets a floor, not a ceiling.
Which states and cities raised their minimum wage in mid-2026?
Alaska increased to $14.00 per hour, Washington, D.C. increased to $18.40, and Oregon’s Portland metro area increased to $16.80. California cities including Berkeley, Los Angeles and San Francisco also increased rates on July 1.
Can a city set a minimum wage higher than its state’s rate?
It depends on the state. Some states allow this, while others, like Alabama, have passed laws preventing cities from setting local rates above the state minimum. Employers should check both state and local rules.
