On Monday, February 4, Governor Phil Murphy made good on a campaign promise and signed into law a new bill (A-15) that will raise the State’s minimum wage to $15 per hour by 2024. This hike in minimum wage, however, will not happen immediately and increases will be phased in over time.

Currently, the minimum wage rate in New Jersey is $8.85 per hour. Under the new law, this rate will jump to $10 per hour on July 1, 2019 and will again increase to $11 per hour by January 1, 2020. At that point, these two increases will amount to an almost 25% increase in minimum wage in about 11 months. After January 1, 2020, the statewide minimum wage will increase by $1 per hour every year on January 1 until the rate reaches $15 per hour on January 1, 2024. Afterward, any further increase in minimum wage would be in accordance with the consumer price index (CPI) for urban wage earners and clerical workers as calculated by the U.S. Department of Labor, Bureau of Labor Statistics. In other words, the federal government uses the CPI to measure the cost of living and, thereafter, the New Jersey Department of Labor and Workforce Development (“NJLWD”) evaluates any changes to the CPI and adjusts the minimum wage as necessary.

Notably, this new minimum wage law places New Jersey in an exclusive group of other states and districts – California, Massachusetts, New York and the District of Columbia – who have similarly authorized such increases in minimum wage.

However, the new minimum wage law will not affect every employee equally – at least at first – and comes with exceptions for certain workers. For instance, seasonal workers and small business employees (businesses that employ five or less individuals) will experience wage increases at a slower rate and have to wait until 2026 for the minimum wage to reach $15 per hour. Specifically, these employees’ minimum wage – currently at $8.85 per hour – will increase to $10.30 per hour by January 1, 2020 and every year thereafter by $.80 per hour until January 1, 2025. Then, a final $.70 increase on January 1, 2026 will be implemented to bring their minimum wage to $15 per hour.

Agricultural workers in New Jersey will also see a similar – and slower – progression in minimum wage increases as their rate will only jump to $12.50 per hour by January 1, 2024. Then, by no later than March 31, 2024, the NJLWD Commissioner and the Secretary of Agriculture (“Secretary”) will decide whether to continue minimum wage increases up to $15 per hour by 2027. (If the Commissioner and Secretary cannot agree on how to move forward, the Governor shall appoint a member of the public – subject to the advice and consent of the Senate – to serve as a tie-breaking vote, if necessary.)

Additionally, tipped workers – who currently earn $2.13 per hour – will see their minimum hourly wage increase to $5.13 per hour by 2024. Further, starting January 1, 2020, employers will be able to pay newly hired employees enrolled in an established on-the-job or other training program a “training wage” of not less than 90% of the established minimum wage at the time. Employers can pay these new employees this training wage for their first 120 hours of work (or first three weeks on-the-job based on a 40-hour workweek), provided the new employee has no previous similar or related experience. The NJLWD Commissioner will implement and adopt standards by which a training program must abide.

At this time, it is critical that employers start preparing themselves for the effect of these increases. For example, employers must think about overtime and the increased amount they will have to pay nonexempt employees for each hour over 40 worked per workweek. Moreover, employers should consult experienced labor and employment attorneys before making any changes to their payment practices and/or business model in an attempt to offset these forthcoming increases in minimum wage, e.g., laying off employees or reducing work hours. Noncompliance with the new minimum wage law could result in substantial penalties and lengthy/costly litigation, as well as possibly lead to unwanted attention from, and increased oversight by, the NJLWD.

Further, unionized employers should be aware that future increases in the State’s minimum wage rates, e.g., $12-$15 per hour, might be higher than the negotiated wage rates in their then-current collective bargaining agreements. In such instances, it is possible – if not likely – that the parties will need to re-open negotiations as to wages to meet the current statutory minimum wage (and this is a certainty where parties provide for such specific re-openings in their contracts themselves).

In sum, New Jersey employers must remain vigilant, proactive, and cautious in complying with these impending changes to the minimum wage rates as their failure to do so could result in serious legal consequences.

For more information about this alert, please contact Carlos Torrejon at ctorrejon@foxrothschild.com or 973.548.3312, or any member of the firm’s Labor and Employment Department.

Carlos A. Torrejon is a former NLRB Attorney and an associate in the firm’s Labor and Employment Department, resident in its Morristown office.