ST. LOUIS — Employers in the city of St. Louis must comply with a new law that goes into effect immediately and raises the minimum wage to $10 per hour for all employees who work at least 20 hours a week.
The minimum wage increase affects the city of St. Louis and puts it above the minimum wage of $7.70 in the surrounding areas of Missouri and $8.25 in nearby places in Illinois.
“It is a risky move for the city,” Joseph Charron, an attorney in Ogletree Deakins' St. Louis office, told the St. Louis Record. “While higher wages will certainly benefit employees working in St. Louis, the increased cost of doing business in the city may force companies to increase the cost of the goods or services they provide, reduce or close their operations in St. Louis or relocate to nearby St. Louis County or Metro East Illinois, where the minimum wage is significantly lower. Additionally, any companies considering a potential move to St. Louis may be dissuaded by the city’s higher labor costs.”
The circuit court lifted the injunction on St. Louis’s minimum wage ordinance pursuant to the Supreme Court of Missouri’s mandate in the case, Cooperative Home Care Inc. v. City of St. Louis.
Employers must also post notices to employees explaining their rights under the ordinance.
The new law has some businesses concerned and possibly opting to move their businesses out of the city.
“Last Friday covered employers saw their labor costs increase nearly 30 percent and will see an additional 10 percent hike on Jan. 1, 2018," Charron said. "Not only does such a large increase immediately impact a business’s bottom line, it puts them at a competitive disadvantage to companies in Metro East Illinois and St. Louis County, whose labor costs are now 17-30 percent lower than employers doing business in the city. One business owner told me that he will likely be forced to shut down or relocate because he could not afford to pay the higher wages.”
Under the city ordinance, the city’s minimum wage will rise again on Jan. 1, 2018, to $11 per hour and increase annually with inflation.
The minimum wage hike may also have employees who made more than $10 per hour asking employers for a raise.
“Large increases to the wages of lower-paid employees – such as is the case here – usually create payroll compression issues for other employees up the ladder," Charron said. "This often results in employers being forced to increase the wages of these somewhat higher paid employees, as well. In fact, many of our clients are already fielding such requests from employees who previously made $10 per hour, but are now being paid the same as employees with significantly less experience and/or responsibilities."