Summary:
You are covered by the new minimum wage law but you can pay the federal minimum wage instead of the Ohio minimum wage. You should be very careful before you rely on an exemption from the minimum wage that is contained in a state law, because the new minimum wage is required by Ohio's Constitution and a state law cannot override the Constitution.
Long answer:
The new minimum wage law, which is in Article II, Section 34a of Ohio's constitution, covers you. I dissected Section 34a's coverage issues in a prior post. So long as you are an "employer" and you are paying "employees", as those terms are defined in 29 USC section 206, Section 34a covers you, with some exceptions. If you look at those terms and exceptions, you will see that you are covered and not exempted.
Section 34a does, however, allow an employer with less than $250,000 in gross revenue to pay the federal minimum wage, if it is lower than Ohio's minimum wage. Therefore, as of January 1, 2007, you can pay your employees $5.15 per hour and comply with Ohio's minimum wage law. If the federal minimum wage increases, however, you must pay the increase.
You may see something from your chamber of commerce or trade association telling you that the Ohio passed a law that adds the federal minimum wage exemptions to Section 34a. A current house bill (HB 690) has been approved by the House and will receive a vote soon from the Senate. HB 690 is a law that defines "employee" for purposes of Section 34a to include the federal minimum wage law exemptions. Those exemptions include businesses grossing less than $250,000. Thus, if HB 690 passes, there will be a law that says small businesses like yours are exempt from the new minimum wage law.
That law, however, is probably a nullity. You need to be very careful with this exemption. Section 34a says that implementing legislation cannot restrict rights under Section 34a. Thus, an exemption under HB 690 that is not contained in Section 34a itself is almost certainly unconstitutional. I discussed this issue at length here.
This means that, if you fail to pay the minimum wage in reliance on an exemption that is unconstitutional and a nullity, you will have violated Section 34a's minimum wage requirement. Therefore, in addition to the minimum wage, you will also owe penalties equal to two times the unpaid minimum wage, plus your employee's attorney's fees. Consequently, I highly recommend that you obtain written advise of an employment law specialist that says you can rely on that exemption before you do so. For my part, I am not prepared to provide that opinion.
Regards,
Neil Klingshirn
