Council gives small businesses more time on minimum wage phase-in

Amendments tweak minimum wage ordinance days before a final vote on Friday

Minneapolis’ small businesses will get more time to adjust to rising wages after the City Council’s Committee of the Whole on Wednesday approved a series of amendments to a citywide minimum wage ordinance.

Council members voted to lengthen the phase-in of higher wages to seven years for small businesses, giving them until 2024 to reach a minimum wage of $15. Large businesses with more than 100 employees would still have to hit $15 in five years, by July 1, 2022.

“I think we need to be moving forward in a way that uplifts workers and simultaneously accounts for the realities small and local business owners are facing in our city,” said Ward 3 City Council Member Jacob Frey, who authored the amendment.

There were signs of more last-minute tweaks to come on Friday when the council convenes for a final vote on the ordinance, but it doesn’t appear that a tip credit, also known as a tip penalty, will be among them.

A tip credit would allow employers to pay their tipped employees a lower minimum wage — as long as their wages plus tips added up to at least $15 an hour. The legal carve-out for tipped employees was one of the most contentious issues in the debate, but the campaigns backed  by dozens of restaurant owners, servers and bartenders appear not to have swayed a majority on the council.

Still, the vast majority of Minneapolis bars and restaurants will now have a longer runway to reach $15. About 88 percent have fewer than 100 employees, according to the city, and so would fall into the ordinance’s small-business tier.

Several council members said they were reluctant to compromise on the five-year phase-in for all businesses, including Cam Gordon (Ward 2) and Alondra Cano (Ward 9), who both advocated for a shorter, four-year phase-in at large businesses. Ward 10 City Council Member Lisa Bender said a separate change — to begin annual inflation-based increases in the minimum wage as soon as it reachers $15 for large businesses in 2022, instead of a year later — was “critical” to winning her support for the amendment.

“I think this is the strongest policy for workers that we can pass through this council,” Bender said, noting that $15 an hour is not considered enough to support a family in Minneapolis even today.

The Committee of the Whole also approved amendments that put several categories of businesses on the longer, seven-year timeline for raising the minimum wage, including non-hospital residential healthcare facilities and ex-offender transition or employment programs. They will be treated as small businesses under the ordinance regardless of size.

Council President Barb Johnson (Ward 4) said nursing homes and home healthcare businesses rely on state and federal reimbursements for their expenses and needed the additional time to adjust to rising labor costs.

Another amendment aimed to ensure workers for larger companies and franchises stay on the five-year minimum wage track, even if their employer has fewer than 100 workers based in Minneapolis. The amendment, authored by Frey and adopted by the committee, states that all businesses with more than two locations in the city and 10 in the state will fall into the large-business tier.

The draft ordinance included a lower training wage for youth workers, allowing employers to pay those under age 20 as little as 85 percent of the minimum wage for their first 90 days on the job. An amendment considered by the Committee of the Whole would have lowered the age cutoff to 18, shortened the training period to 60 days and added language that employers must offer a city-approved training or apprenticeship program to qualify. It failed to pass.

But the conversation on youth workers is likely to continue Friday, when City Council Member Andrew Johnson (Ward 12) said he plans to offer an amendment to recognize a “separate class” of teen jobs that “are really there to help those kids get their feet wet in the workplace.” As Johnson explained, council members are trying to respond to the concerns of youth workers — including younger college students and teens who contribute financially to their families, who he said deserve equal pay for doing the work of adults — and the concerns of business owners who recruit and employ young teens without prior workplace experience.

Committee members also passed a series of staff directions, including one seeking funding for a study on the ordinance’s impact. Another seeks to add financial supports in the form of a matching grant program for small businesses and restaurants that may struggle during the transition.

CORRECTION: An earlier version of this story incorrectly reported that an amendment related to youth workers was adopted. It failed to pass.