January 1, 2013

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State Minimum Wage Rates Have Risen in Arizona and Colorado

Arizona's minimum hourly wage rate increased by $0.15 per hour on January 1, 2013, from $7.65 to $7.80 per hour. The increase was announced by the Arizona Industrial Commission, and reflects a comparable percentage increase in the cost-of-living formula -- specifically, the federal Consumer Price Index ("CPI") for All Urban Consumers -- to which Arizona's minimum wage rate is statutorily tied.

Colorado's minimum hourly wage rate also increased on January 1, 2013, by $0.14 per hour to $7.78 per hour. Colorado's minimum wage rate is tied to the CPI for the Denver-Boulder-Greeley combined area.

Colorado has had a minimum wage law for many years. In 2006, however, a voter initiative amended the Colorado Constitution to eliminate the discretion vested in the Colorado Department of Labor to change the minimum hourly wage (which it had last done in 1997 to match the federal minimum wage). Instead, the constitutional amendment ties the minimum wage rate to changes in the CPI, in order to "guarantee that the wage will not lose its buying power."1 In 2011, the Colorado Court of Appeals rejected a challenge by a group of rural Colorado employers to the constitutionality of tying the state's minimum wage to the Denver-Boulder-Greeley CPI.2

In Arizona, prior to 2006 there was no generally applicable state minimum wage law at all. The only minimum wage rate of concern to most Arizona employers was the one established by the federal Fair Labor Standards Act ("FLSA"). However, in November 2006, Arizona voters approved a ballot initiative, known as Proposition 202, that established a broadly applicable state minimum wage, and provided for annual upward adjustments to that wage to reflect the rate of inflation.

The initial state minimum wage in Arizona, which became effective on January 1, 2007, was $6.75 per hour. Since that time, the state minimum wage has increased steadily, although by varying amounts, every year except 2010, when there was no adjustment in the statutory wage rate because there had been no increase in the applicable cost-of-living index during the preceding year (in Colorado, the state minimum wage actually decreased by $.04 per hour in 2010).

While the FLSA still establishes a federal minimum wage, the federal minimum wage in 2013 will continue to be lower than the corresponding state minimum wage rates in Arizona and Colorado. In particular, the federal minimum wage will remain at $7.25 per hour in 2013, as compared to the new Arizona minimum wage of $7.80 and Colorado minimum wage of $7.78. Employers are bound to pay the higher of the two potentially applicable minimum wage rates.

The typical full-time minimum wage employee in Arizona works in the service industry. Assuming an eight hour day and a 260-day work year, that employee will have earned approximately $16,000 in 2012. Assuming the employee will be retained despite the additional cost to the employer (an issue often debated by economists and others),3 the adjustment in the hourly minimum wage in 2013 will increase the employee's annual earnings by slightly more than $300.

The fact that less than 10% of workers are currently earning the minimum wage (one federal study indicates the percentage may be as low as 2%) has prompted some observers to suggest that annual increases in the minimum wage should be of little concern to employers. However, the observation ignores the ripple effect caused by increases in the minimum wage, which place pressure on employers to raise the wages and salaries of other, higher paid employees in order to keep pace with the increases employers are required to make to the wages paid to their minimum wage employees.

In any event, the increase in the state minimum wage requires employers with employees who are being paid the applicable minimum wage to decide whether to retain those employees at the higher rate that applies in 2013. The increase also requires all employers to change the posted minimum wage notice they are statutorily required to display, in a form prescribed by the state agencies charged with enforcing wage and hour laws, in the common areas of establishments in which their employees work and where their other employment notices are posted.

For help with any of your employment issues, please contact Michael D. Moberly at (602) 440-4821 or any member of Ryley Carlock & Applewhite's Labor and Employment practice group.

1Legis. Council of Colo. General Assembly, Analysis of 2006 Ballot Proposals, 554–1, pt. 1, at 11–14 (2006).

2Table Services, LTD v. Hickenlooper, 257 P.3d 1210 (Colo. App. 2011).

3For a summary of this debate, see Matthew Stoloff, Comment, Minimal Change?: Implications of the "Raise the Minimum Wage for Working Arizonans Act," 39 ARIZ. ST. L.J. 1287, 1295-1302 (2007).