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As Minneapolis minimum wage ticks up, city prepares to address more violations

Up to this point, the law hasn’t impacted many employers in Minneapolis, since most already paid rates above the law’s pre-2019 requirements. That changes July 1. 

Amir Malik, Brian Walsh, Guled Ibrahim
Brian Walsh, enforcement supervisor of the city’s labor standards division in the department of civil rights, center, shown with attorneys Amir Malik and Guled Ibrahim.
MinnPost photo by Jessica Lee

For Brian Walsh, the job of enforcing Minneapolis’ 2017 minimum wage law has only just begun. From teaching new payroll systems to investigating alleged violations by employers, there are a lot of challenges in enforcing the city’s labor standards, which is one result of the law’s incremental approach.

On Monday, the effort marked a milestone, however. Minneapolis rolled out its second annual increase to the minimum wage under the law: from $11.25 to $12.25 for large businesses, and from $10.25 to $11 for employers of 100 or fewer workers. The hike is part of the city’s multi-year plan to raise the minimum wage to $15 hourly for all businesses by 2024, with gradual adjustments that aim to provide business owners time to adjust.

Up to this point, the law hasn’t impacted many employers, Walsh said, since most already paid rates above the law’s pre-2019 requirements. But with the new standards starting Monday and subsequent hikes, more Minneapolis businesses will need to revamp their payscale to comply with the law. 

As a result, Walsh and his team in the labor standards enforcement division of the city’s civil rights department are preparing for an accelerated rate of noncompliance reports. “In a lot of ways, the rubber hits the road because we’ll see where the minimum wage is bumping up with the labor market,” Walsh said.

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More jobs, more industries affected

Anyone — including those who want to remain anonymous and patrons of businesses — can report violations of Minneapolis minimum wage law, either by calling 311, filling out an online form or contacting Walsh’s office inside City Hall’s Department of Civil Rights

Once the attorneys receive a complaint of noncompliance, they collect data such as records of employees’ hours and rates and interview the employer’s payroll keeper. (Under the city’s law, tips do not count toward the payment of minimum wage, and babysitters, non-profit volunteers and some workers with disabilities or in transportation jobs are exempt. Some employees under the age of 20 also aren’t covered by the law.)

On a recent afternoon last week, Walsh sat down with the owner of a small supermarket on Lake Street to figure out why the market wasn’t following the new rate standards. The attorney learned the owner had actually taken proactive steps by investing in a payroll system that kept up with the rising wage, and the violation was a result of poor communication among staff. 

That’s a common error, it turns out. “Violations (often) occur at front-line management, supervisor-level positions — not all the way up the chain of ownership of the company,” Walsh said. 

In situations when business owners are purposefully breaking the law, the department issues fines up to $1,000 per employee and makes sure they correct the problem. 

Since the law went into effect in January 2018, Walsh and his team of three attorneys (who also investigate alleged violations of the city’s 2016 sick and safe time law) have launched 30 investigations into reports of illegal wages, he said. As a result of that work, he said Minneapolis employees have earned back more than $21,000 in lost wages and penalties. About half of the complaints were against employers in the service industry.

Wade Lüneburg, a leader of UNITE HERE Local 17, a union that represents some 6,000 hospitality and restaurant workers in the Twin Cities, said most of those members earn above the current wage marks, though they are paying close attention to the incremental increases, like Monday’s, since they set a new bar for future contract negotiations. “It gives us an opportunity to negotiate better wages that are needed in the tight labor market,” he said.

As Minneapolis’ minimum wage ticks up, Walsh is preparing for an increase in the team’s workload. That’s because Monday’s change is likely to match or exceed a number of Minneapolis businesses’ lowest rates for employees, he said, growing the pool of employers the law will affect. 

“I’m expecting things to increase, probably not exponentially, but I do expect things to pick up — the frequency and number of complaints to rise,” Walsh said.

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The Federal Reserve Bank of Minneapolis is studying the economic impact of the ordinance as time goes on and will release findings in annual reports. In the reserve’s baseline report, released in September, the researchers mapped out what jobs and industries are likely to fall under the law’s umbrella by 2023. While service industry workers such as bartenders and servers are on track to make up the majority of the impacted workforce, almost half of all retail workers and janitorial positions are also expected to be affected over the next several years. Furthermore, the study says an increasing number of employers in industries including manufacturing, retail, arts and entertainment and administrative services will have to change rates to keep up.

‘Hard from a business perspective’

The City Council approved the measure to raise the minimum wage in December 2017, making Minneapolis Minnesota’s first city to adopt a local minimum wage higher than the state’s. 

Since then, numerous U.S. cities and a handful of states have made the same policy change, part of a growing effort by left-leaning activists and politicians to alleviate income and racial disparities. 

Critics of the law, including some state lawmakers, have long said not all employers can cover the higher payroll expenses, and that lower wages help those without much job experience enter the labor market. Critics have also argued that having a minimum wage that’s higher in Minneapolis than in surrounding communities creates unfairness among nearby business competitors. 

A legal challenge to the ordinance argued the Minnesota Fair Labor Standards Act preempts Minneapolis’ decision; that the state not local municipalities should establish employment rules. In March, however, the Minnesota Court of Appeals in March ruled to uphold the local law.

Today, some business owners say they’ve noticed positive results from the city’s higher minimum wage requirements. Quang Pham, owner of Lu’s Sandwiches, says employees of his bánh mì businesses — which include a food truck and two restaurants in Minneapolis — seem to work more efficiently and as a team when they’re paid well. He’s had a goal of paying all employees at least $15 hourly by 2020.

Lu’s Sandwiches, a Minneapolis Bánh Mì shop, has seen positive results from the city’s higher minimum wage requirements, owner Quaug Pham said.
MinnPost photo by Jessica Lee
Lu’s Sandwiches, a Minneapolis Bánh Mì shop, has seen positive results from the city’s higher minimum wage requirements, owner Quaug Pham said.
But upping payroll expenses could mean shifting around the business’ budget. Already, he said profit margins are tight. Even so, Pham feels less anxiety about raising wages since his competitors in Minneapolis must raise rates, too. “It’s a rough road — $15 is hard from a business perspective,” he said. “But from the employee perspective, it’s great.”

Minneapolis minimum-wage phase-in schedule
DateSmall employersLarge employers
January 1, 2018$10.00
July 1, 2018$10.25$11.25
July 1, 2019$11.00$12.25
July 1, 2020$11.75$13.25
July 1, 2021$12.50$14.25
July 1, 2022$13.50$15.00*
July 1, 2023$14.50
July 1, 2024Equal to large business
*Increases to account for inflation every subsequent January 1st.

With the new standards, one worker at Lu’s Sandwiches is now able to save up for a car, Pham said.

Maria Gomez, 20, is working for minimum wage 35 hours per week at a Subway restaurant in the city’s Longfellow neighborhood. Speaking through a translator, she said some months she worries if she’s going to have enough money to pay rent. But she sees the city’s move to raise low-wage earnings as helpful, even though she thinks the increase should’ve been higher than $15 and that the incremental increases mean many workers are still waiting to see the benefits. She said while she’s making sandwiches at Subway, she’s trying to learn more English so she can eventually start a career as an accountant.

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Emmet Kowler, 24, a freelance theater technician and designer, relied on the city’s minimum wage for different reasons. In December, he started working a service job at Sun Street Breads in south Minneapolis so that he has more disposable income for meals and nights out and so he can feel less financial stress when creative gigs are slow. 

But he quit the job in April in part, he said, because the minimum wage is not enough to make up for the mental and physical demands of the work. Since then, he said he hasn’t noticed a big difference in his budget. “I could never not think about how little I was being paid,” he said. “The difference in a dollar in wage, especially in a job without benefits, is not significant. We don’t need a dollar more — we need like $8, $10, $15 more.”