Minnesota Has One Minimum Wage for Every Employer, and No Employer May Take a Tip Credit Against It

One rate, every employer

Minnesota used to run a two-tier minimum wage, and a great deal of what is still online describes that system. It is gone. Minn. Stat. § 177.24, subd. 1(a), now reads:

(a) Except as otherwise provided in sections 177.21 to 177.35, every employer must pay each employee wages at a rate of at least:

(1) $8.00 per hour beginning August 1, 2014;

(2) $9.00 per hour beginning August 1, 2015;

(3) $9.50 per hour beginning August 1, 2016; and

(4) the rate established under paragraph (c) beginning January 1, 2018.

“Every employer” — one list, no branch for size. The change was made by Laws 2024, ch. 110, art. 6, § 3, which struck three separate sub-rates out of the subdivision: the small-employer rate, the rate for employees under 18, and the rate for employees working under a summer work travel exchange visitor (J) nonimmigrant visa at a hotel, motel, lodging establishment, or resort. That section carries its own effective-date clause — “This section is effective January 1, 2025, except that the amendments to paragraph (c) are effective August 1, 2024.”

The number in the statute is not the number you are owed

Read clause (4) again. The operative rate is not printed in the section at all; it is “the rate established under paragraph (c).” Paragraph (c) is the indexing machinery:

No later than August 31 of each year, the commissioner shall determine the percentage increase in the rate of inflation, as measured by the implicit price deflator, national data for personal consumption expenditures as determined by the United States Department of Commerce, Bureau of Economic Analysis during the 12-month period immediately preceding that August or, if that data is unavailable, during the most recent 12-month period for which data is available. The minimum wage rates in paragraphs (a) and (b) are increased by the lesser of: (1) five percent, rounded to the nearest cent; or (2) the percentage calculated by the commissioner, rounded to the nearest cent. A minimum wage rate shall not be reduced under this paragraph. The new minimum wage rates determined under this paragraph take effect on the next January 1.

Two features of that paragraph decide most arguments about it. The adjustment is capped at five percent, and the cap is the lesser of the two figures — so a year of high inflation does not produce a proportional raise. And the rate cannot go down; “[a] minimum wage rate shall not be reduced under this paragraph.” The five percent ceiling is itself recent: the same 2024 act raised it from 2.5 percent, and struck the commissioner’s former authority to issue an order suspending an increase after a public hearing.

Because the statute delegates the number, you have to go to the Department of Labor and Industry for it. The Department’s minimum-wage page publishes these figures:

The Department states the announcement in its own words: “Effective Jan. 1, 2027, Minnesota’s minimum-wage rate will be adjusted for inflation to $11.87 an hour for all employers in the state.” That is consistent with paragraph (c): the commissioner makes the determination by August 31, and it takes effect the following January 1.

Two qualifications the Department publishes on the same page. “Minimum-wage rates apply to all hours worked, whether part time or full time.” And “St. Paul and Minneapolis both have minimum wage ordinances that may require a higher rate of pay.” The city ordinances are not part of chapter 177 and are not described on this page.

The training wage is narrow, and the youth wage is gone

Section 177.24, subd. 1(b), is the only sub-rate left:

(b) Notwithstanding paragraph (a), during the first 90 consecutive days of employment, an employer may pay an employee under the age of 20 years a wage of at least:

(1) $6.50 per hour beginning August 1, 2014;

(2) $7.25 per hour beginning August 1, 2015;

(3) $7.75 per hour beginning August 1, 2016; and

(4) the rate established under paragraph (c) beginning January 1, 2018.

No employer may take any action to displace an employee, including a partial displacement through a reduction in hours, wages, or employment benefits, in order to hire an employee at the wage authorized in this paragraph.

Age and duration are both elements. An employee who turns 20 on day 40 is outside the paragraph on day 40. An employee under 20 on day 91 is outside it on day 91. And the anti-displacement sentence is not decorative: cutting an existing worker’s hours to open a slot at the training wage is the conduct the sentence names.

Minnesota no longer has a separate youth wage for employees under 18 — that rate came out with the 2024 amendment. What people call “the youth wage” and what the statute calls the 90-day training wage are now the same single sub-rate, which is how the Department labels it.

No tip credit, in one sentence

Note how wide subdivision 2 is drawn. It bars crediting gratuities “directly or indirectly,” and it bars crediting them against the minimum wage “set by this section or federal law” — so an employer cannot reach past the state rate and claim the federal tip credit as a fallback. Who owns the tips in the first place, and what happens to a mandatory service charge, is a separate set of rules: see tips, service charges, and who owns them.

One piece of federal law does still operate here, because it is a floor and not a permission. 29 U.S.C. § 203(m)(2)(B): “An employer may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.”

Deductions cannot be used to get underneath the rate

Section 177.24, subd. 4, closes the obvious workaround. It provides that deductions from “wages or gratuities” not authorized by the subdivision itself “may only be taken as authorized by sections 177.28, subdivision 3, 181.06, and 181.79”; caps the uniform and equipment deductions it does authorize at $50; and then provides that “[n]o deductions, direct or indirect, may be made for the items listed below which when subtracted from wages would reduce the wages below the minimum wage” — the listed items being required uniforms and specially designed clothing, employment equipment, consumable supplies, and in-employment travel. Subdivision 5 requires the employer, at the end of employment, to “reimburse the full amount deducted, directly or indirectly, for any of the items listed in subdivision 4,” with one carve-out for a motor vehicle dealer’s rental and maintenance deduction. The whole deduction picture, including what an employer may take out for breakage or a cash shortage, is on deductions from your pay.

Who is covered

Chapter 177’s wage floor runs to an “employee,” and § 177.23, subd. 7, then removes nineteen categories from that word — among them certain agricultural workers, resident-camp staff, “any individual employed in a bona fide executive, administrative, or professional capacity,” taxicab drivers, sole-practitioner babysitters, seafarers, and drivers in positions where the U.S. Department of Transportation sets hours of service. “Employer” is defined broadly in subd. 6 as “any individual, partnership, association, corporation, business trust, or any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee.”

The exemption that is misapplied most often is clause (6), the executive-administrative-professional exemption, and the mistake is assuming a salary settles it. It does not; that is covered on breaks and overtime after January 1, 2026. If the question is whether you are an employee at all, start at misclassified as a contractor.

What underpayment costs an employer

Three routes, and they do not carry the same remedies.

A compliance order. Section 177.24 sits inside the range the commissioner of labor and industry may enforce by order under § 177.27, subd. 4. An employer that wants to contest such an order “must file written notice of objection to the order with the commissioner within 15 calendar days after being served”; if it does not, “the order becomes a final order of the commissioner.” Where an order issues, subd. 7 directs the commissioner to order the employer “to pay to the aggrieved parties back pay, gratuities, and compensatory damages, less any amount actually paid to the aggrieved parties by the employer, and for an additional equal amount as liquidated damages,” and adds “an additional civil penalty of up to $10,000 for each violation for each employee” against an employer found “to have repeatedly or willfully violated” a listed section.

Your own lawsuit. Section 177.27, subd. 8, gives an employee a civil action “directly to district court” for a violation of §§ 177.21 to 177.44, and makes an underpaying employer “liable to the employee for the full amount of the wages, gratuities, and overtime compensation, less any amount the employer or contractor is able to establish was actually paid to the employee and for an additional equal amount as liquidated damages.” The last sentence forecloses the defense employers reach for first: “An agreement between the employee and the employer to work for less than the applicable wage is not a defense to the action.” Under subd. 10, costs and attorney fees in such an action are mandatory — the court “shall order” them.

The records rule that decides close cases. Under § 177.30(a), every employer subject to §§ 177.21 to 177.44 must keep, for three years, the rate of pay and the amount paid each pay period, and the hours worked each day and each workweek. Under paragraph (d): “If the records maintained by the employer do not provide sufficient information to determine the exact amount of back wages due an employee, the commissioner may make a determination of wages due based on available evidence.” Inadequate employer records do not end the inquiry in a Department proceeding: paragraph (d) authorizes the commissioner to determine wages due on available evidence rather than on the employer’s books. Minn. Stat. § 177.27, subd. 3, gives the commissioner the same authority. Neither paragraph speaks to what happens in an employee’s own action under § 177.27, subd. 8.

Paying below the rate is also a misdemeanor. Section 177.32, subd. 1(7), makes an employer guilty of a misdemeanor for paying or agreeing to pay “wages at a rate less than the rate required under sections 177.21 to 177.44.” Charging is a prosecutor’s decision, not an employee’s.

The deadline is short. Minn. Stat. § 541.07(5) gives two years for an action “for the recovery of wages or overtime or damages, fees, or penalties accruing under any federal or state law respecting the payment of wages …,” and three years “if the employer fails to submit payroll records by a specified date upon request of the Department of Labor and Industry or if the nonpayment is willful and not the result of mistake or inadvertence.” Every wage deadline on one page: every Minnesota employment deadline in one table.

Currency

The Revisor publishes the 2025 edition of the statutes. A Table 2 query run against § 177.24 on September 8, 2026 returns ten rows and no action in the 2025 or 2026 sessions; the most recent are Laws 2024, ch. 110, art. 6, § 3 (subd. 1) and art. 7, § 1 (new subd. 3a). The same query against § 177.23 returns four rows, the most recent being the two new definitions added by Laws 2024, ch. 110, art. 6, §§ 1 and 2. Section 177.24’s History line ends “2024 c 110 art 6 s 3; art 7 s 1,” and § 177.23’s ends “2024 c 110 art 6 s 1,2.” Section 177.27’s History line ends “1Sp2025 c 6 art 5 s 6,” so the posted text carries the 2025 first special session amendment; that amendment reached subd. 5, not the subdivisions quoted here. Sections 177.30 and 177.32 show no 2025 or 2026 action, and neither does § 541.07.

What this page does not do

This describes the rate and the machinery that sets it. It does not tell you whether a particular paycheck was short, which turns on your hours, your classification, and which employer you worked for in a given week — and applying the statute to a specific pay period is not what this page does. The Department of Labor and Industry publishes the current figures at dli.mn.gov/minwage, and they change every January 1.