Under pressure from St. Paul Mayor Melvin Carter’s office and a wide cast of labor advocates, the St. Paul City Council recently approved gradual citywide wage increases, making the capital city the latest to move toward a $15 hourly minimum.

The mandates roll out on different schedules for micro, small, large, and macro businesses of more than 10,000 employees.

With important exceptions, most employers will be required to pay their employees at least $15 per hour within 3½ to 8½ years.

Veena Iyer, a St. Paul resident and attorney with the Minneapolis law firm Nilan Johnson Lewis, advises a wide range of employers on issues related to the new $15 minimum wage mandates that were recently approved in both St. Paul and Minneapolis. Her clients range from Fortune 500 companies to small nonprofits.

The Pioneer Press interviewed her on Tuesday. The following has been edited for length and clarity.

Does St. Paul’s minimum wage mandate apply to companies based outside of St. Paul who send workers into the city?

It’s pretty clear from the ordinance if you have an employee who spends at least two hours in a week working in St. Paul, that individual needs to be paid the St. Paul minimum wage for those two hours of work. What that means is employers have a couple of choices. They’ve got to be tracking those employees for the times they’re working in the city.

If that individual is working overtime hours, then you have to take into account the individual is being paid a different rate for calculating overtime. It’s pretty difficult. I think you’ll see smaller employers, with a small budget, stuck with an administrative burden of monitoring hours to get the rates right.

You mention there’s a couple of choices here?

Some employers will decide, hey, we’re just going to increase wages more broadly so we comply with the Minneapolis and St. Paul wage rates. The employers who are going to do that are those that are already sending employees into Minneapolis and St. Paul so often that that’s going to make economic sense. Related Articles GOP expecting Trump to tap Amy Coney Barrett for Supreme Court

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Then you’ll have a group of employers who say, ‘You know what? We’re just not going to send workers into Minneapolis or St. Paul.’ … Some employers on the border, as well as those in the city, will be making some tough choices over the next few years.

I can certainly see them looking at their budgets and looking at their forecasts and saying we can’t afford to be in St. Paul anymore — or for those on the border, we can’t afford to send employees into St. Paul anymore. I would say, when I think about looking at this, I really do think it will take us a good number of years.

What’s a “good number of years”?

I wouldn’t be surprised if it takes four or five years. I appreciated the fact that the St. Paul City Council really tried really hard to put employers into different buckets, and to give more time to those smaller and micro-employers. … And of course, who knows what the economy is going to be like then?

I would say look to 2020 to 2023. … I think over the next five years they’ll have the data as to how it’s going in Minneapolis, and that’s going to inform some of their decision-making.

What are the biggest differences between the Minneapolis and St. Paul minimum wage ordinances?

The biggest difference is the categorization of businesses. In Minneapolis, you have two categories — large businesses, which are more than 100 employees, and small businesses, which are less than 100 employees. In St. Paul, you have macro, which are more than 10,000 employees. And large, which is more than 100. Small is 6 to 100 employees. And micro which is 5 or fewer. And the other thing you have, just the length of time for implementation is longer in St. Paul.

In St. Paul, there are partial exemptions for youth trainees and certain programs that work with the disabled, correct?

That’s actually a little bit broader in St. Paul than it is in Minneapolis. Minneapolis does have a training wage, but it’s only for 90 days. In St. Paul it’s ongoing. Under the training wage, which is for workers under 20 in a city-approved training program, they get 85 percent of the wage required of small employers. There’s also a youth wage, and that’s for workers between 14 and 17 for the first 90 days of employment. That’s also 85 percent of the minimum wage rate for small employers. You definitely have a few more exclusions in St. Paul than you had in Minneapolis.

There are ongoing legal challenges to the Minneapolis ordinance, correct?

That is scheduled before the Minnesota Court of Appeals in a couple of weeks. We’ll see what happens there. There’s a number of pieces of that … (but) if the court says there are problems with the Minneapolis ordinance, there’s going to be problems with the St. Paul ordinance as well.

What’s the biggest argument before the courts?

Essentially, it’s a lot like the challenge to the ‘Sick and Safe Time’ ordinances. It’s primarily a pre-emption argument — that the state law that deals with the minimum wages, such as the minimum wage that deals with people with disabilities, has pre-empted cities from adopting their own wages.

(On the paid leave mandate, or ‘Sick and Safe Time’), the district court in Hennepin County said there is limitation on extra-territorial application — employers who are not based in the city of Minneapolis. (The exemption for employers based outside the city) was imposed. That appeal has not been heard yet.)

There was a similar case that was a challenge to the Minneapolis wage ordinance on pre-emption grounds as well as the extra-territorial grounds. The district court there (didn’t agree). … That decision has now been appealed to the Minnesota Court of Appeals.

So employers are shouldering the combination of paid sick leave and minimum wage increases, and there could be more changes ahead?

As a very practical matter, in terms of the administrative impact that it’s having on our smaller employers, as well as the costs, that I think is very real. Combined, they’re having a significant impact on businesses.

How are employers taking this?

We’re living in a time where there’s a big labor shortage. We have lots of clients who are really struggling to fill positions that are open for a very long time. Certainly, wages are one way to attract that talent.

(But) the economy is not always going to be this way. If there’s anything we know about the economy, it goes up and it goes down. Will this kind of lockstep increase to the minimum wage allow the flexibility that’s going to be needed to attract that workforce going forward?

For service employers, in particular, it’s really difficult. There’s not a tip credit. It’s very clear what the service industry needs to do: it’s got to pay the minimum wage. That’s going to mean there’s fewer options for restaurants who are going to have to figure out how to comply with the ordinance while a lot of restaurants are already operating with thin margins. Related Articles Man, 38, dies of apparent natural causes at Ramsey County jail

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What else would you add?

Minnesota is very, very unique with regard to tip-pooling statutes and the very significant restrictions it imposes on tip pooling. … The tip credit restriction, that certainly happens in other cities, but combined with the significant restrictions on tip pooling under Minnesota law, it’s going to be a double whammy on our restaurant industry. There was a significant case about it with regard to Surly Brewing a year ago. But the actual statute has been around for a while. It’s been the subject of litigation here in Minnesota recently.