On May 25, 2007, President Bush signed into law H.R. 2206, the "War Funding" bill.  Included in this bill was the "Fair Minimum Wage Act of 2007," an amendment to the Fair Labor Standards Act (FLSA).  The new legislation increases the federal minimum wage for covered, non-exempt employees from its current level of $5.15 per hour to $5.85 per hour effective July 24, 2007.

Over the next two years, the federal minimum wage will increase to $7.25 an hour, in three phases:

• $5.85, effective July 24, 2007

• $6.55, effective July 24, 2008

• $7.25, effective July 24, 2009

The new legislation does not impact the current minimum cash wage for tipped employees of $2.13 per hour.  Employers will, however, need to continue to ensure that tips received are sufficient to bring the employee's total wages to an amount equal to or greater than the new minimum wage rate.  More information regarding the FLSA minimum wage provisions and FLSA coverage can be found on the US Department of Labor (DOL) website.

All employers subject to the FLSA's minimum wage provisions are required to post a notice explaining the Act.  The content of the notice is prescribed by the US DOL, Wage and Hour Division.  The US DOL is expected to release materials regarding the provision of the "Fair Minimum Wage Act of 2007" in the coming weeks.

In addition to the increase in the federal minimum wage, several states whose wage rates are tied to the federal rate will also see an increase in their minimum wage.  Several other states will continue to have a minimum wage higher than the federal minimum wage, while still other states will now have a minimum wage rate below the federal minimum wage.  Employers covered by both state and federal minimum wage law must observe the higher of the two rates.  For information about state minimum wage rates, employers may contact their local Department of Labor or visit their website.

Employers are encouraged to evaluate their pay practices as soon as possible to ensure compliance with all state and federal requirements.  Employers found to be in violation of this new minimum wage law, or any other applicable employment law, may be subject to fines or other penalties.