January 1 brought minimum wage increases in more than 20 states — and if you have employees in any of them, your compliance obligation changed. Here is what small business owners need to know.
The federal minimum wage remains $7.25 per hour, unchanged since 2009. But the federal floor is largely academic for most employers — the vast majority of states set minimums well above that rate, and those state rates are the ones that actually govern your payroll obligations.
Among the states with significant increases effective January 2026 are California ($17.50 for most employers), New York ($17.00 in New York City and surrounding counties, $16.00 elsewhere), Washington ($16.66), Colorado ($14.81), and Massachusetts ($15.75). Several additional states have scheduled increases mid-year.
Tipped employees are subject to separate minimum wage rules that vary by state — some states require the full minimum wage regardless of tips, while others allow a tip credit that reduces the required cash wage.
Minimum wage violations are among the most frequently cited wage and hour violations in DOL audits. The exposure includes back wages for all affected employees for up to three years, plus liquidated damages equal to the back wage amount, plus attorney fees. For a business with 15 employees paid below minimum wage for 90 days, the exposure can be significant.
A 15-minute payroll review at the start of each year to confirm compliance with updated minimums is one of the highest-value HR actions you can take for the time invested.
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