Who this is for: Employers of all sizes who need a comprehensive, up-to-date guide to federal and state minimum wage laws for 2026, including tipped employees, city/county rates that exceed state minimums, scheduled increases, and compliance recordkeeping requirements.

Federal Minimum Wage: The Floor That Has Not Moved in 15 Years

The federal minimum wage of $7.25 per hour was last set by the Fair Labor Standards Act (FLSA) in July 2009. It applies in states that have not enacted a higher state minimum wage, including states like Texas, Georgia, Wyoming, and others that have either set their state minimum at $7.25 or have no state minimum wage at all.

According to the U.S. Department of Labor Wage and Hour Division, employers covered by the FLSA must pay the federal minimum wage unless a higher state or local rate applies. The FLSA covers most employers in the private sector and government employers. When state or local law sets a higher rate, employers must pay the higher amount.

How Minimum Wage Hierarchy Works

The rule is simple: always pay the highest applicable minimum wage. The hierarchy is:

1. Local (city or county) minimum wage, if higher than state
2. State minimum wage, if higher than federal
3. Federal minimum wage ($7.25) as the floor

If you operate in Seattle, Washington, for example: the federal minimum is $7.25, the Washington State minimum for 2026 is $16.66, and Seattle’s minimum is $20.76 for large employers. You pay $20.76. Always.

Tipped Employee Rules

Federal law allows employers to pay tipped employees a lower “tipped minimum wage” of $2.13 per hour as long as tips bring the employee’s total hourly earnings up to at least $7.25. The difference between the cash wage paid and $7.25 is called the “tip credit.” If an employee’s tips do not cover the difference, the employer must make up the shortfall.

However, many states have eliminated or restricted the tip credit:

• California, Oregon, Washington, Minnesota, Nevada, Alaska, and Montana: No tip credit allowed. Tipped employees must be paid the full state minimum wage regardless of tips received.
• New York: The tip credit varies by industry and region.
• Most other states: Allow a tip credit but set the tipped minimum wage higher than the federal $2.13.

City and County Minimums That Exceed State Rates

These are major metro areas with local minimums above their state rate for 2026:

• Seattle, WA: $20.76 (large employers); $20.76 also applies to many smaller employers depending on benefit structure
• San Francisco, CA: $18.67
• New York City, NY: $16.50 for most workers
• Los Angeles, CA: $17.28 (unincorporated LA County: $17.27)
• Denver, CO: $18.81
• Chicago, IL: $16.20 (large employers); $15.60 (small employers)
• Washington, D.C.: $17.50
• Portland, OR: $15.95
• Minneapolis, MN: $15.57 (large employers)
• Jersey City, NJ: $15.34

These rates change frequently, often annually. Always verify current rates with your city or county wage authority before setting payroll.

Minimum Wage by State: Full 50-State Table (2026)

Note: Rates reflect best available 2026 data. Always verify current rates with your state labor department or the DOL before setting payroll, as rates can change mid-year.

How to Stay Compliant

Compliance with minimum wage law is not optional, and the Department of Labor actively investigates violations through audits, employee complaints, and industry-targeted enforcement campaigns. Here is how to stay on the right side:

1. Know your applicable rate: Federal, state, and local. Pay the highest.
2. Update payroll when rates change: Many states increase annually, often on January 1. Calendar alerts 30 days before known increase dates help.
3. Understand tipped employee rules in your state: Check whether your state allows a tip credit and what the tipped minimum wage is.
4. Post required notices: Federal and state law requires minimum wage posters to be displayed in your workplace where employees can see them. Download current posters from the DOL and your state labor department.
5. Audit your classifications: Employees paid a salary are still subject to minimum wage and overtime rules unless they meet FLSA exemption tests. Learn more in our guide to setting up payroll.

Recordkeeping Requirements

The FLSA requires employers to keep specific payroll records for non-exempt employees for at least three years. Required records include:

• Employee’s full name, Social Security number, and address
• Date of birth (if under 19)
• Sex and occupation
• Hour and day the workweek begins
• Total hours worked each workday and workweek
• Total daily or weekly straight-time earnings
• Regular hourly pay rate
• Total overtime earnings for the workweek
• All additions to or deductions from wages
• Total wages paid each pay period and the date and period of payment

These records must be preserved and accessible for DOL inspection. Payroll software (QuickBooks, Gusto, ADP) automatically maintains most of these records. See how your payroll and employee classification decisions intersect in our guide to W-2 vs. 1099 classification.

Key Takeaways

• The federal minimum wage is $7.25 and has not changed since 2009; most states and many cities set higher rates.
• Always pay the highest applicable rate: local, state, or federal.
• 30+ states have minimum wages above the federal floor; roughly 20 states default to the federal rate.
• Cities like Seattle ($20.76), San Francisco ($18.67), and Denver ($18.81) exceed their state minimums.
• Tipped employee rules vary dramatically by state; California, Oregon, and Washington prohibit tip credits entirely.
• FLSA requires payroll records to be kept for at least three years.
• Post required minimum wage notices in your workplace and update payroll promptly when rates change.

Frequently Asked Questions

What is the federal minimum wage for 2026?

The federal minimum wage remains $7.25 per hour as of 2026. There has been no federal legislation to increase it since the Fair Minimum Wage Act of 2007 phased in the current rate by July 2009. Absent federal action, the floor stays at $7.25. Employers in states without a higher state minimum wage must pay at least $7.25.

Can employers pay less than minimum wage to young workers?

The FLSA allows a youth minimum wage of $4.25 per hour for employees under age 20 for the first 90 consecutive calendar days of employment. After 90 days (or on their 20th birthday), the standard minimum wage applies. Some states do not allow this youth differential; check your state law before applying it.

What happens if I pay less than minimum wage?

Employers found to have violated minimum wage requirements can be assessed back wages for up to two years (three years for willful violations), plus an equal amount in liquidated (double) damages, plus civil penalties up to $1,000 per violation. The DOL Wage and Hour Division can investigate and the affected employees can also sue in federal court. This is a costly mistake to make.

Do minimum wage laws apply to part-time workers?

Yes. Minimum wage requirements apply to all non-exempt employees regardless of whether they work full-time or part-time. There is no lower minimum wage tier for part-time workers under federal law or most state laws.

How do I know if my city has a higher minimum wage than my state?

Check your city or county government’s website, or search the DOL’s minimum wage map tool. You can also check your state labor department’s website, as many now maintain lists of local minimum wages within the state. When in doubt, contact your city’s business licensing office or a local employment attorney.

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