As a small business owner, it’s critical to be aware of minimum wage laws in your state. And although Alabama hasn’t raised its minimum wage this year, it’s important to make sure you’re current on the state regulations and prepared for upcoming changes so you can plan accordingly.
To help you, we’ve prepared a quick guide with details on the Alabama minimum wage.
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What is the minimum wage in Alabama?
Alabama is one of five states that hasn’t adopted a state minimum wage law, so it adheres to the federal minimum wage of $7.25, which hasn’t changed since 2009.
While the minimum wage applies to most occupations and employees, there are a few exceptions, including:
- Tipped employees who earn at least $30 per month in tips. They must be paid a minimum of $2.13 per hour, and that amount plus tips must equal the minimum wage of $7.25.
- Employees under the age of 20. The Fair Labor Standards Act (FLSA) allows all of these employees to be paid a minimum wage of $4.25 per hour for their first 90 days of employment. After the 90 days have passed, these employees must be paid the full minimum wage.
- Full-time students. Full-time vocational students may be paid a sub-minimum wage rate (75 percent of the applicable minimum wage). Full-time students employed in retail or service stores, agriculture, or at colleges and universities may be paid a sub-minimum wage rate of 85 percent of the applicable minimum wage.
- Certain disabled workers (with a certificate from the Alabama Department of Labor).
Since Alabama doesn’t have state minimum wage laws, all employers and employees are subject to federal exemption standards set forth by the FLSA.
Will the minimum wage change in 2019?
As of now, there are no plans to raise the minimum wage.
However, there’s been an ongoing battle by workers in Birmingham to raise the city’s minimum wage. In February 2016, the city of Birmingham passed legislation to raise the city’s minimum wage from $7.25 per hour to $10.10 per hour. Immediately following that, the state legislature passed a law barring municipalities from setting their own minimum wage, effectively reversing the minimum wage increase.
Since then, the NAACP, a group of fast-food workers, and other labor groups have filed a lawsuit in federal district court, challenging the state law. Initially, it was dismissed, but in July 2018, the 11th U.S. Circuit Court of Appeals ruled that Alabama’s “preemption law” (i.e., using state law to override a local ordinance) violated the 14th Amendment’s equal protection rights. Now the Alabama Attorney General is reviewing the court’s decision.
While this latest ruling doesn’t mean the wage hike will take effect, the outcome could set a precedent for other cities battling states for minimum wage increases.
How should small business owners prepare for changes to the minimum wage?
While there’s currently no plan to raise Alabama’s minimum wage, it’s smart to plan ahead for potential changes. Here are key steps you should take to ensure your business is ready:
- Reassess your staffing: Take stock of your monthly sales and expenses to determine if your current staffing levels are appropriate. Once you review your monthly cash flow, reevaluate your current staffing plan and determine if adjustments are necessary.
- Hire the right employees: Finding employees isn’t easy; it takes time and money. If you follow best hiring practices, though, you’re more likely to find the right employees the first time around. Once you find the right people, work hard to keep them motivated. If your employees are motivated, they’ll be more engaged, happier, and more likely to stick around.
- Upgrade your technology: Make your operations more efficient by automating time-consuming tasks, such as payroll administration. If you do this, you’ll free up time to focus on management issues like staffing and growing your business.
As always, to make sure your business is prepared and stays in compliance, you should discuss Alabama’s minimum wage laws with your accountant and lawyer.