If your business has employees, be prepared to pay more for them. Generally, employees are either exempt (salary) or non-exempt (hourly). Between moves from the federal and state government, you are going to have to pay more for either type.
Currently, under the rules of the Department of Labor, in order to avoid having to pay overtime to employees, you must pay your employees a minimum of $23,660. An action from the Department of Labor is, likely, going to increase that to a minimum of $35,309. In other words, the new minimum you will be required to pay your salaried employees is $679 per week. If you drop below that, you will be required to pay overtime to those employees if they work more than 40 hours per week (in Nevada the rule is a little more complicated and requires overtime if the employee either works more than 40 hours per week or eight hours per day) Basic economics will push all salaried wages up and you should expect that you will have to increase your salaried employees by just under 50 percent.
At the very same time, on March 25, 2019, the Nevada Legislature introduced AB 459 to increase the minimum wage. Currently, the minimum wage is $7.25 for those employees who are offered health insurance and $8.25 for those who are not. AB 459 will increase the minimum wage to $12.00 per hour (for those without health insurance and $11.00 for those with). Basic economics will play out here as well. As such, you can expect to increase all of your hourly employees by just over 30 percent.
The cost to your business does not stop there. Consider that you have to pay increased amounts to the federal government for employee withholding tax. Unemployment and workers’ compensation rates are based upon your gross payroll, so those are going up as well. Furthermore, if you pay the Nevada Modified Business Tax, that is also based upon gross payroll. That cost will increase accordingly.
Just when you thought it could not hurt you any further, there is an additional treat (or trick, depending on your perspective) included in AB 456. The bill allows for an employee who is not properly paid to bring a lawsuit against the employer. If the employee wins that lawsuit, the employee is entitled to back pay, damages and his/her attorneys’ fees and costs. If you read between the lines, this means that lawyers will get the biggest raise of all.
Across the country, lawyers have been aggressively bringing cases against employers (primarily those who have tipped employees) for failing to satisfy the minimum wage. In another wave of lawsuits, aggressive lawyers have been bringing claims against those businesses that retain talent through independent contractor agreements, arguing that those agreements are not valid and the businesses have violated wage laws (like minimum wage).
Gordon Law has written extensively about the merits of independent contractor agreements and the safest ways to implement them. I encourage you to take a look through our blog archive to review them. I further urge you to closely follow how the federal and state government actions are changing your business’ requirements and reach out to Gordon Law to ensure that you are complying.