Effective January 1, 2019, New Jersey’s minimum wage will increase 25 cents to $8.85 per hour,  the state’s Department of Labor and Workforce Development announced on October 12.

New Jersey voters approved a constitutional amendment in 2013 that increased the minimum wage to $8.25 and indexed the state’s minimum wage rate to the consumer price index for urban wage earners and clerical workers (CPI-W).

While the CPI-W calculation itself is somewhat technical and complex, the takeaway for employers is that New Jersey’s minimum wage now has the potential to increase each calendar year – based roughly upon the increase in the cost of living. It has already automatically increased several times since the passage of the state constitutional amendment.

How should employers respond to the latest increase?

FIRST, prudent employers should begin planning now. Since the effective date of January 1, 2019 is less than 90 days away – or about six bi-weekly pay periods – the time to think about adjustments to payroll processes, budgeting, and other operations is now.

SECOND, employers should keep in mind that non-compliance carries stiff penalties. New Jersey law permits employees paid less than the minimum wage to sue to recover the difference. Moreover, employees who sue may recover costs and attorney’s fees – a potentially expensive proposition for employers. Non-complying employers also run the risk that employees will bring collective or class actions or trigger an investigation by NJLWD.

THIRD, employers should consider how this change will affect overtime payments. New Jersey law requires nonexempt employees to be paid at a rate of at least 1.5 times the employee’s regular rate for all hours worked over 40 in a workweek. This means a nonexempt employee who earns the minimum wage must be paid at least $13.28 per hour for each hour over 40 worked per workweek, effective January 1.

FOURTH, employers should continue to monitor developments in New Jersey’s minimum wage laws. Gov. Phil Murphy has repeatedly expressed an interest in raising the state’s minimum wage to $15 per hour. Legislative leaders have also shown an interest in raising the minimum wage above the indexed requirements, although concrete legislative action on this point has yet to occur.

For these reasons, employers are encouraged to consult knowledgeable employment counsel with experience in New Jersey wage and hour matters to ensure timely compliance and minimize litigation risk.