United States: The St. Louis Minimum Wage Returns From The Dead

On August 28, 2015, the City of St. Louis passed an ordinance raising the minimum wage to $11.00 per hour by January 1, 2018. The ordinance initially increased the minimum wage to $8.25 per hour with an October 15, 2015 effective date and phased in the remaining increases over a three-year period. The minimum wage was scheduled to increase as follows:

Effective Date           Amount per Hour

January 1, 2016          $9.00

January 1, 2017          $10.00

January 1, 2018          $11.00

Thereafter, beginning on January 1, 2019, the minimum wage would increase each January 1 on a percentage basis to reflect the rate of inflation.

The ordinance, however, appeared to be dead in the water when Circuit Judge Steven Ohmer struck down the ordinance on October 15, 2015—hours before the first increase was to take effect. According to Ohmer, because the ordinance conflicted with Missouri's minimum wage law, it was void and unenforceable. Accordingly, Judge Ohmer issued a permanent injunction against the City's enforcement of the ordinance.

As Mayor Francis Slay promised in his tweet immediately following Judge Ohmer's ruling, the City appealed the decision and the Supreme Court of Missouri heard oral arguments on October 6, 2016. Four months later, on February 28, 2017, the ordinance was resuscitated when the Supreme Court of Missouri, in Cooperative Home Care, Inc. v. City of St. Louis (No. SC95401), reversed Judge Ohmer's decision, holding that the ordinance is merely supplemental to—rather than in conflict with—Missouri's minimum wage law.

The Cooperative Home Care decision poses several dilemmas for employers. The following are some examples.

Competition. Employers in St. Louis compete for customers and employees with Metro East Illinois and St. Louis County organizations. As of March 1, 2017, the minimum wages in each of these areas are as follows:

Jurisdiction                            March 1, 2017 Minimum Wage Rate

St. Louis County                                 $ 7.70 per hour

Metro East Illinois                              $ 8.25 per hour

City of St. Louis                                 $10.00 per hour

Note that St. Louis County does not have its own minimum wage ordinance, but, instead, follows the state minimum wage rate. On one hand, city employers will need to develop pricing strategies for their goods and services that will enable them to compete with County and Metro East organizations yet remain profitable. Conversely, city employers may now be in a better position to recruit and retain potential employees attracted to the higher wages in the city. This may also drive up wages for County and Metro East employers, who will be in competition for those employees.

Payroll Shock. Covered—non-exempt—employers will now be required to pay covered employees a minimum wage of $10.00 per hour. Following the state supreme court's decision, the City issued a press release in which Mayor Slay promised a "reasonable grace period" for businesses to adjust to the new minimum wage. Whether this grace period will involve a stepped progression to $10.00 per hour (and then to $11.00 per hour in 2018), as well as the amount of time city employers have to comply with the ordinance are still unknown at this time.  

Regardless of when the increases take effect, their impact will be significant. For an employer paying the $7.70 per hour Missouri minimum wage rate, the immediate raise would equal $2.30 per hour—or almost 30 percent. For an employer paying $8.25 per hour, the raise would be $1.75—or 21 percent. Large increases to the wages of lower paid employees—such as is the case here­—will usually create payroll compression issues for other employees up the ladder. This often results in employers being forced to increase the wages of these somewhat higher paid employees as well. Payroll shock will result for city employers as most of them, it is safe to say, have not budgeted for such steep increases.  

Penalties for Noncompliance. Although the ordinance does not, by its own terms, give individuals a private right of action, the penalties for noncompliance are steep. Employers that fail to comply with the ordinance potentially face penalties of up to 90 days in jail, up to a $500 fine, or both per violation. These penalties will add up quickly as each day an employer is not in compliance with the ordinance constitutes a separate violation. Moreover, employers also face the prospect of paying restitution to employees for unpaid wages—plus interest—and can also have their business licenses revoked for repeated or intentional violations.

Payroll shock may cause employers doing business in the City of St. Louis to question their commitment to remaining in the city. If the City wants to maintain the employers that it now has, it may refrain from vigorously enforcing penalties.

Other Requirements: Posters and the Paycheck Stuffers. By now, all employers are familiar with the legion of posters required by municipal, state, and federal agencies. The city ordinance adds one more required poster: covered employers with work sites in the city must post a notice "in a conspicuous place" at each of its city facilities where covered employees work—and the notice must reprint certain sections of the ordinance.

The city ordinance also requires that each covered employer provide each covered employee a notice specifying the current minimum wage rate, the employee's rights under the ordinance, and a reprint of certain sections of the ordinance. This notice must accompany the employee's first paycheck subject to the ordinance,

For employers that provided the paycheck stuffer back in October of 2015, this process probably only need be repeated for employees hired since the last stuffer was distributed. However, until the City publishes further guidance on implementation of the ordinance, it is unclear whether the 2015 payroll stuffers will satisfy the notice requirements. Employers that have never distributed the stuffer are required to do so with the first paycheck "subject to this ordinance." At this point, it is unclear when the first paycheck will be issued as the City has not defined the "reasonable grace period" for businesses to comply. Employers, however, may want to begin preparing for compliance as any "grace period" may be relatively short.

Prior to the ordinance's implementation in October 2015, the City published a leaflet and notice for employers to post in their workplace and include as a payroll stuffer. To date, the City has not released an updated notice. Prudent employers may want to consider preparing revised notices now, to avoid potential noncompliance once the compliance date is identified.

Applicability Outside the City. Employers that do not maintain facilities inside the city may believe they can ignore the ordinance. Unfortunately, the ordinance, by its terms, states that it applies to employees, wherever domiciled, who work at least 20 hours in the calendar year while physically present in the city. While the city exempts St. Louis County employers from posting the notice in their buildings, the ordinance does not provide the same exemption for the paycheck stuffer. Thus, covered employers will be required to provide the paycheck stuffer to all employees performing at least 20 hours of work inside the city limits within a calendar year—even if an employer does not maintain facilities within the city.

These and other compliance dilemmas will haunt St. Louis area employers for the foreseeable future.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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