The top ten trending payroll topics of state legislatures are: (1) minimum wage, (2) paid leave, (3) employer tax credits, (4) unemployment, (5) earned wage access; (6) pay transparency, (7) tip credit elimination, (8) worker classification, (9) state-run retirement plans, and (10) work scheduling.
States eye workforce as a legislative priority for payroll
The majority of state legislatures began their legislative sessions this January. A flurry of bills is being proposed in the payroll space — many having to do with labor and employment. This came as no surprise to Tim Storey, CEO of the National Conference of State Legislators (NCSL). During an early-December 2022 NCSL Forecast 2023 meeting he explained the challenge to employ workers has been echoed by legislators nationwide.
Storey noted that during informal focus groups with 20 legislative leaders, a common concern expressed was workforce. From difficulties filling state jobs to worker retention issues with private employers in the state. Storey noted that as public policy leaders, employers turn to state legislators for assistance. Storey described the “silver tsunami” of baby boomers reaching retirement age and leaving the workforce. Add the competition of gig work with its flexibility, and traditional employers are struggling to fill their jobs.
State legislators are responding to the call. Whether it’s introducing apprenticeships or other training programs or tackling adjacent issues such as paid time off or offering worker protections, these measures are meant to bring workers back.
Payroll on Checkpoint examined 133 pieces of payroll-related state legislation across the nation to spot the top ten hot topics that are being tackled in the current legislative session.
Table of contents:
- Minimum wage
- Paid leave
- Tax credits
- Earned wage access
- Pay transparency
- Tipped workers
- Worker classification
- State-run retirement plans
- Work scheduling
1. Minimum wage
With over 32 bills so far introduced on the topic, the minimum wage is a perennial favorite for state legislators.
Minimum wage increases. 13 states are looking to increase their current minimum wage rates.
Arizona. House Bill 2240 seeks an increase to $15 per hour in 2024 and also calls for future increases indexed for inflation.
Indiana. The minimum wage is a hot topic in Indiana with three proposed bills. House Bill 1394 would increase the minimum wage from $7.25 to $15 per hour, effective July 1, 2023. While House Bill 1192 proposes a more modest and gradual approach until the minimum wage reaches $12.10 per hour by 2027. Yet another bill (Senate Bill 366) looks to increase the minimum wage to $13 per hour.
Kansas. The state has two minimum wage bills. Senate Bill 70 proposes gradual increases until the minimum wage reaches $16 per hour in 2027. Senate Bill 32 would incrementally increase the minimum wage until it reaches $15 per hour on July 1, 2027. The bill would also increase the average annual gross volume of sales of retail stores, service industries, hotels, motels, and 16 restaurant operations from $95,000 to $500,000 to qualify for an exception.
Maryland. The state currently has scheduled minimum wage increases. The proposed bill (Senate Bill 81) would further increase the state’s minimum wage.
Missouri. Currently, the state indexes its minimum wage annually for inflation. Senate Bill 515 proposes gradual increases until the minimum wage reaches $15 per hour by 2026.
Montana. House Bill 201 would increase the floor of the state minimum wage rate from $6.15 per hour to $11.39. Current law requires the state minimum wage to be the greater of the federal minimum wage or $6.15 per hour, adjusted annually. The current minimum wage is $9.95 per hour.
New Hampshire. Senate Bill 144 seeks to increase the minimum wage from $7.25 per hour to $13 per hour, beginning September 1, 2023, and to $15 per hour, effective July 1, 2024.
New Mexico. The state’s last scheduled increase is $12.00 per hour, beginning January 1, 2023. House Bill 25 proposes an increase to $16.00 per hour in 2024 and would require annual cost of living adjustments.
New York. With two minimum wage bills, New York is looking for overall scheduled increases through 2027 with adjustments indexed for inflation thereafter (Senate Bill 1978). The proposal would also eliminate the differentiation between small and large employers but keep the geographical rate differentiation. Assembly Bill 1710 is looking to increase the minimum wage for miscellaneous workers to $15 per hour by 2027.
Oklahoma. The state has two proposals. The current state minimum wage is $7.25 per hour. One bill (House Bill 1986) proposes placing a minimum wage rate increase on the ballot that calls for incremental increases until the minimum wage reaches to $11 per hour by 2026. Senate Bill 163 proposes to increase the minimum wage to $13 per hour, effective November 1, 2023, and calls for 50¢ increases over a five-year period.
Rhode Island. Senate Bill 37 proposes to increase the minimum wage to $15 per hour in 2024 and $20 per hour in 2025.
Texas. House Bill 1125 would increase the minimum wage from $7.25 per hour to $15 per hour by 2025.
West Virginia. House Bill 2481 seeks to increase the minimum wage to $15 per hour by 2029 through incremental increases.
Some states are looking to change only certain elements of their minimum wage laws:
Connecticut. House Bill 6364 is looking to eliminate the subminimum wage rate for persons with disabilities. This bill also seeks to eliminate FLSA exemptions for state purpose. In House Bill 6276, a reduction in the youth minimum wage is proposed as well as eliminating the 90-day limit of its use.
Hawaii. Senate Bill 230 would authorize counties to establish a minimum wage rate higher than the state’s rate.
Nebraska. LB15 would establish a youth minimum wage as well as a training wage rate.
New Hampshire. House Bill 583 would eliminate the use of subminimum wage rates for people with disabilities.
New Mexico. House 28 proposes to index its state minimum wage for inflation. Currently, the minimum wage increases only through legislative action.
Oregon. The state is exploring options on how to handle future increases. House Bill 2699 would tie future minimum wage increases based on fair market rent estimates. House Bill 2443 is looking to index its minimum wage for a five-year period following its scheduled increases rather than on a continual basis.
Virginia. House Bill 1669 would establish a youth wage of $9.00 per hour.
West Virginia. The state currently has a minimum wage of $8.75 per hour since 2016. House Bill 2982 proposes to index the state minimum wage to inflation beginning September 1, 2023.
Two states that do not currently have minimum wage and overtime provisions are looking to change that. There are proposed bills in both the House and the Senate of Mississippi (Senate Bill 2439/ House Bill 583) that seek to establish a minimum wage and overtime law for the state.
Currently, Mississippi does not have any minimum wage or overtime provisions. S2439 would set the minimum wage at $12 per hour, beginning January 1, 2024, and increase it to $16 per hour, beginning January 1, 2026. The Senate bill includes a training wage of 85% of the state minimum wage and a cash minimum wage for tipped workers of 50% of the state minimum wage. H583 would set the minimum wage at $8.50 per hour with a cash minimum wage for tipped workers at $3.62 per hour. Both bills feature overtime provisions.
South Carolina (Senate Bill 216) would set the state minimum wage at $2.00 above the federal minimum wage (currently, $7.25 per hour). The provision would apply only to individuals who are entitled to the federal minimum wage under the FLSA.
2. Paid leave
Paid Family and Medical Leave remains a hot topic in the 2023 legislative session. While Congress continues to debate Paid Family and Medical Leave, states are examining their options. 13 states have proposed Paid Family and Medical Leave Insurance programs where employees and/or employers contribute premiums. These states include:
- Arizona (House Bill 2130)
- Hawaii (Senate Bill 360 and House Bill 490)
- Indiana (House Bill 1243)
- Iowa (Senate Bill 95)
- Minnesota (Senate Bill 2)
- Mississippi (Senate Bill 2286)
- Nebraska (LB 57)
- North Dakota (House Bill 1460)
- Oklahoma has two measures. One bill is proposing to put PFMLI on the ballot (House Bill 1994). The other would create the PFMLI program through legislative action (Senate Bill 990).
- Tennessee (Senate Bill 227) – for certain state employees only.
- Vermont (House Bill 66)
- Virginia (House Bill 2035)
- West Virginia (Senate Bill 197) – pilot program for Parental Paid leave
States that already have PFMLI programs on the books are eyeing some changes.
Colorado began collecting premiums for its PFMLI program, beginning January 1, 2023, with benefits being paid out beginning in 2024. House Bill 1104 looks to postpone implementation of the program for one year. Premiums collected in 2023 would then be credited for premiums owed in 2024.
A proposed bill (House Bill 2138) in Oregon seeks to repeal its PFMLI program, beginning January 1, 2024, and would instead offer a tax credit to employers who provide paid family and medical leave. The bill also calls for any unused PFMLI premiums to be reverted to the General Fund.
Washington (Senate Bill 5286) looks to amend the premium rate calculation for its PFMLI program and makes other updates.
Currently, 14 states require employers to provide paid sick leave. Seven states are looking to add paid sick leave requirements or amend current requirements.
Kentucky (House Bill 69), Hawaii (House Bill 235), Minnesota (Senate Bill 34), and Texas (House Bill 404) are proposing employer-provided paid sick leave requirements. Hawaii is also looking to require supplemental paid sick leave for public health emergencies. Minnesota has several localities that have paid sick leave ordinances. Arkansas has a bill that would require employers to provide paid maternity leave (House Bill 1006).
Connecticut already requires certain employers to provide paid sick leave. House Bill 6363 would require employers who are required to provide paid sick leave to also provide two mental health days per year.
Virginia has a paid sick leave requirement for certain home health workers. House Bill 1988 seeks to amend current provisions to allow carryover of unused accrued leave as well as require written notice of the paid sick leave policy.
3. Tax credits
State legislators are looking to offer businesses tax incentives for certain benefits to employees. There are several bills that propose tax credits for employers for:
- providing paid family and medical leave: Oklahoma Senate Bill 384;
- purchasing employee disability insurance: Oklahoma Senate Bill 581;
- providing qualified transportation fringe benefits and also creating a requirement: New York Assembly Bill 1944;
- employing individuals with disabilities: North Dakota House Bill 1244 and Indiana House Bill 1559;
- paying employees a required local minimum wage greater than the state minimum wage: Arizona Senate Bill 1108;
- hiring the first permanent employee on the payroll: New York Assembly Bill 1755;
- participating in a Four-Day Workweek Pilot program: Maryland Senate Bill 197; and
- allowing telework for at least 30% of employees: Hawaii House Bill 513.
There are seven bills designed to tackle unemployment issues so far in the 2023 legislative session. California (Senate Bill 227), Connecticut (House Bill 6365), and Washington (Senate Bill 5109) have proposed bills that would permit undocumented individuals to collect unemployment benefits if certain eligibility requirements are met.
Missouri (Senate Bill 21) has a proposed bill that would revise the maximum number of weeks that unemployment benefits may be collected by tying the maximum number of weeks to the state’s unemployment rate.
A proposed bill in Michigan (Senate Bill 40) would look to increase the maximum weeks that benefits may be claimed to 26 weeks. A work sharing program is being proposed in Indiana (Senate Bill 347). Finally, in Oklahoma, a bill (House Bill 2457) is being proposed that would exclude commissions and bonuses from wages as well as one-time bonuses and overtime pay for wage reporting purposes.
5. Earned wage access
Earned wage access (EWA) is a form of on-demand wage payment where employees can access wages after they have performed services rather than wait for the usual pay date. It’s a popular perk that workers want, but state legislators are grappling with how these programs should be regulated.
Six states have introduced legislation that would require registration or licensure by “earned wage access services” to operate in their state. Some proposed legislation includes certain written notice requirements to be provided to employees as well as provisions regarding fees.
License and posting of bond required: Virginia House Bill 1921
Mississippi’s proposed legislation (Senate Bill 2648) does not require registration or licensure. However, the bill does lay out certain requirements for earned wage access providers including disclosing terms and conditions and prohibiting mandatory payments or charging late fees, interest or other penalties.
6. Pay transparency
Pay transparency is slowly gaining steam among state legislatures. In an effort to provide pay transparency, there has been a trend to require employers to provide salary ranges in both external and internal job postings or provide the information upon request. Currently, there are eight states and several localities that have such requirements. So far, four states are eyeing similar requirements:
Connecticut currently requires employers to provide salary ranges upon request. A proposed bill (House Bill 5243) would require the disclosure of salary ranges on job postings while House Bill 6273 would require salary ranges on internal job postings.
A proposed bill (Senate Bill 1057) in Hawaii would require job listings to include an hourly rate or salary range.
In Montana, a proposed bill (Senate Bill 146) on wage discrimination includes a provision that requires wage or salary range information including benefits on job postings.
While Jersey City has a pay transparency requirement, New Jersey does not. The state has a proposed bill (Assembly Bill 4285) that would require employers to provide salary and benefit information on job postings.
7. Tipped workers
Seven states currently do not permit employers to take a tip credit against the minimum wage. The District of Columbia will be joining them soon. Voters approved a ballot measure that will gradually eliminate the tip credit. The city council has recently voted to delay the effective date of the measure from January 1, 2023 to May 1, 2023 (see Payroll Update, 1/24/2023).
Two states are proposing similar measures. Connecticut has a bill (House Bill 6364) that would repeal the tip credit outright, while Hawaii favors the phased-out approach with its proposed bill (Senate Bill 270). Currently, Hawaii permits tipped workers to be paid $1 less than the state minimum wage. The bill proposes a 25¢ decrease until 2029 where workers would be paid the full state minimum wage.
8. Worker classification
Worker classification is an issue that can impact multiple facets of the payroll arena from withholding tax, unemployment, wage and hour, and workers’ compensation. Failing to make the correct determination of whether a worker is an employee or independent contractor can lead to not only penalties but unpaid liabilities. It’s no wonder that some state legislatures are trying to get a handle on the situation.
States generally use a common law test (behavioral control, financial control, and type of relationship) or an ABC test (focuses on control, whether services are performed outside the usual course of the employer’s business, and whether individual is customarily engaged in an independent business). The ABC test begins with a presumption that the worker is an employee and therefore is considered stricter than the common law test.
Currently, New Jersey uses the ABC test but a proposed bill (Senate Bill 599) would change the state over to the common law test. While New York, who currently uses the common law test, has a proposed bill (Assembly Bill 2085) that would change over to the ABC test. Oklahoma has a proposed bill (Senate Bill 31) that would adopt the Uniform Worker Classification Act, a model policy brought forth by the American Legislative Exchange Council (ALEC). Under the Act, a worker determination would apply to all laws in the state.
In Indiana, a proposed bill (Senate Bill 32) seeks to have its state tax, labor, unemployment, and workers’ compensation agencies provide information on classification including assessed penalties and the classification criteria of each agency.
9. State-run retirement plans
There is a growing concern many employees do not have access to an employer-provided retirement plan. As a result, several states began offering a state-run program. Currently, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Massachusetts, Maryland, Maine, New Jersey, New Mexico, New York, Oregon, Virginia, and Vermont offer such plans along with a few localities.
Two states have proposed bills that would establish a Secure Choice Retirement program: Minnesota (Senate Bill 413) and Mississippi (House Bill 204). These programs generally include an automatic enrollment where employees may opt out and require employers to perform a wage deduction to be remitted to the state. Employer matching is not required under these types of programs.
10. Work scheduling
Work scheduling laws can come under many names from predictive scheduling or fair workweek. It’s been mostly a trend of cities and focus on a specific industry such as retail, hospitality, and food. On the state front, only Oregon (see Payroll Guide ¶17,178) has a predictive scheduling law. It’s become an important issue as some states look to protect workers from sudden schedule changes that impact work-life balance. There are four states with proposed legislation that require predictive scheduling: Hawaii (Senate Bill 42); Michigan (House Bill 4035); and New York (Senate Bill 2560 and Senate Bill 2479).
Payroll on Checkpoint will continue to monitor state legislation on payroll issues and keep you informed of the latest developments.