Federal Minimum Wage

The federal minimum wage hasn't changed since July 2009, the longest stretch since the FLSA took effect in 1938. That's not because minimum wage has stopped being controversial. It's because Congress hasn't passed an increase, so the real work happens at the state and local level. As of 2026, more than 30 states, the District of Columbia, and dozens of cities set minimums above the federal $7.25 floor. For multi-state employers, the federal rate is almost irrelevant day to day; what matters is tracking every jurisdiction where you employ workers and applying whichever rate is highest in each.

Where the $7.25 Rate Still Applies

In 2026, roughly 20 states still align with the federal $7.25 rate, concentrated in the Southeast and parts of the Midwest. Employers in those states pay $7.25 as the applicable minimum for most non-exempt workers, subject to the tip credit and certain worker-specific exemptions.

Federal contractors and subcontractors have their own minimum under Executive Order 14026, currently set at $17.75 per hour for 2026. That rate indexes annually based on the Consumer Price Index.

State and Local Rates That Exceed Federal

California, Washington, New York, New Jersey, Massachusetts, Connecticut, and Illinois all set statewide minimums well above $15 per hour in 2026. Local rates go higher still: Seattle, San Francisco, Denver, and New York City all exceed $18 per hour for most employers.

Which Workers Aren't Covered by the Federal Minimum Wage?

Several categories have different rules. Tipped workers can be paid $2.13 per hour federally as long as tips bring total compensation to at least $7.25; most states reject the tip credit and require full minimum wage. Workers under 20 can be paid $4.25 per hour for their first 90 consecutive days. Student-learners, certain disabled workers, and full-time students in specific programs also have subminimum provisions.

How the Highest-Rate Rule Actually Works

Covered employers pay whichever rate is highest among federal, state, and local law. An employee working in Los Angeles gets the Los Angeles city minimum, because that's the highest floor applicable to the work location. An employee working across multiple jurisdictions gets the applicable minimum for each jurisdiction where hours are worked.

Multi-state employers need time tracking that captures work location, not just employer HQ. Pay stubs should reflect the applicable rate.

Keeping Federal Minimum Wage Compliance Clean in a Multi-Jurisdiction Payroll

Build a minimum wage matrix by state and major city, updated every December for January 1 changes and reviewed mid-year for scheduled rate increases. Many states now index their minimums to inflation, so the rate moves automatically.

Audit pay rates quarterly against the current minimum in every jurisdiction. Review the DOL Wage and Hour Division minimum wage page for federal updates and the state minimum wage chart for the current state-by-state picture. Tie compliance reviews to broader overtime, minimum wage, and payroll controls, because minimum wage errors often travel together with overtime and recordkeeping issues.