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-UNOFFICIAL COPY  26 RS BR 1243
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-AN ACT relating to wages. 1
-Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
-Section 1.   KRS 337.010 is amended to read as follows: 3
-(1) As used in this chapter, unless the context requires otherwise: 4
-(a) "Commissioner" means the commissioner of the Department of Workplace 5
-Standards under the direction and supervision of th e secretary of the 6
-Education and Labor Cabinet; 7
-(b) "Department" means the Department of Workplace Standards in the 8
-Education and Labor Cabinet; 9
-(c) 1. "Wages" includes any compensation due to an employee by reason of 10
-his or her employment, including salaries, commissions, vested vacation 11
-pay, overtime pay, severance or dismissal pay, earned bonuses, and any 12
-other similar advantages agreed upon by the employer and the employee 13
-or provided to employees as an established policy. The wages shall be 14
-payable in legal tender of the United States, checks on banks, direct 15
-deposits, or payroll card accounts convertible into cash on demand at 16
-full face value, subject to the allowances made in this chapter. However, 17
-an employee may not be charged an activation fee and the payroll card 18
-account shall provide the employee with the ability, without charge, to 19
-make at least one (1) withdrawal per pay period for any amount up to 20
-and including the full account balance. 21
-2. For the purposes of calculating hourly wage rates for scheduled 22
-overtime for professional firefighters, as defined in KRS 95A.210(8), 23
-"wages" shall not include the distribution to qualified professional 24
-firefighters by local governments of supplements received from the 25
-Firefighters Foundation Program Fund. For the purposes of calculating 26
-hourly wage rates for unscheduled overtime for professional firefighters, 27
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-as defined in KRS 95A.210(9), "wages" shall inclu de the distribution to 1
-qualified professional firefighters by local governments of supplements 2
-received from the Firefighters Foundation Program Fund; 3
-(d) "Employer" is any person, either individual, corporation, partnership, agency, 4
-or firm who employs an  employee and includes any person, either individual, 5
-corporation, partnership, agency, or firm acting directly or indirectly in the 6
-interest of an employer in relation to an employee; and 7
-(e) "Employee" is any person employed by or suffered or permitted t o work for 8
-an employer, except that: 9
-1. Notwithstanding any voluntary agreement entered into between the 10
-United States Department of Labor and a franchisee, neither a franchisee 11
-nor a franchisee's employee shall be deemed to be an employee of the 12
-franchisor for any purpose under this chapter; and 13
-2. Notwithstanding any voluntary agreement entered into between the 14
-United States Department of Labor and a franchisor, neither a franchisor 15
-nor a franchisor's employee shall be deemed to be an employee of the 16
-franchisee for any purpose under this chapter. 17
- For purposes of this paragraph, "franchisee" and "franchisor" have the same 18
-meanings as in 16 C.F.R. sec. 436.1. 19
-(2) As used in KRS 337.275 to 337.325, 337.345, and 337.385 to 337.405, unless the 20
-context requires otherwise: 21
-(a) "Employee" is any person employed by or suffered or permitted to work for 22
-an employer, but shall not include: 23
-1. Any individual employed in agriculture; 24
-2. Any individual employed in a bona fide executive, administrative, 25
-supervisory, or pr ofessional capacity, or in the capacity of outside 26
-salesman, or as an outside collector as the terms are defined by 27
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-administrative regulations of the commissioner; 1
-3. Any individual employed by the United States; 2
-4. Any individual employed in domestic serv ice in or about a private 3
-home. The provisions of this section shall include individuals employed 4
-in domestic service in or about the home of an employer where there is 5
-more than one (1) domestic servant regularly employed; 6
-5. Any individual classified and  given a certificate by the commissioner 7
-showing a status of learner, apprentice, worker with a disability, 8
-sheltered workshop employee, and student under administrative 9
-procedures and administrative regulations prescribed and promulgated 10
-by the commission er. This certificate shall authorize employment at the 11
-wages, less than the established fixed minimum fair wage rates, and for 12
-the period of time fixed by the commissioner and stated in the certificate 13
-issued to the person; 14
-6. Employees of retail stores, s ervice industries, hotels, motels, and 15
-restaurant operations whose average annual gross volume of sales made 16
-for business done is less than five hundred thousand dollars 17
-($500,000)[ninety-five thousand dollars ($95,000)]  for the five (5) 18
-preceding years ex clusive of excise taxes at the retail level or if the 19
-employee is the parent, spouse, child, or other member of his or her 20
-employer's immediate family; 21
-7. Any individual employed as a baby -sitter in an employer's home, or an 22
-individual employed as a compan ion by a sick, convalescing, or elderly 23
-person or by the person's immediate family, to care for that sick, 24
-convalescing, or elderly person and whose principal duties do not 25
-include housekeeping; 26
-8. Any individual engaged in the delivery of newspapers to the consumer; 27
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-9. Any individual subject to the provisions of KRS Chapters 7, 16, 27A, 1
-30A, and 18A provided that the secretary of the Personnel Cabinet shall 2
-have the authority to prescribe by administrative regulation those 3
-emergency employees, or others, w ho shall receive overtime pay rates 4
-necessary for the efficient operation of government and the protection of 5
-affected employees; 6
-10. Any employee employed by an establishment which is an organized 7
-nonprofit camp, religious, or nonprofit educational confer ence center, if 8
-it does not operate for more than two hundred ten (210) days in any 9
-calendar year; 10
-11. Any employee whose function is to provide twenty -four (24) hour 11
-residential care on the employer's premises in a parental role to children 12
-who are primarily dependent, neglected, and abused and who are in the 13
-care of private, nonprofit childcaring facilities licensed by the Cabinet 14
-for Health and Family Services under KRS 199.640 to 199.670; 15
-12. Any individual whose function is to provide twenty -four (24) hour 16
-residential care in his or her own home as a family caregiver, family 17
-home provider, or adult foster care provider and who is approved to 18
-provide family caregiver services to an adult with a disability through a 19
-contractual relationship with a communi ty board for mental health or 20
-individuals with an intellectual disability established under KRS 21
-210.370 to 210.460 or through a contractual relationship with a certified 22
-waiver provider as defined in 907 KAR 7:005 sec. 1(5), or is certified or 23
-licensed by the Cabinet for Health and Family Services to provide adult 24
-foster care; 25
-13. A direct seller as defined in Section 3508(b)(2) of the Internal Revenue 26
-Code of 1986; 27
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-14. Any individual whose function is to provide behavior support services, 1
-behavior programming services, case management services, community 2
-living support services, positive behavior support services, or respite 3
-services through a contractual relationship with a certified waiver 4
-provider, as defined in 907 KAR 7:005 sec. 1(5), pursuant to a 191 5(c) 5
-home and community based services waiver program, as defined in 907 6
-KAR 7:005 sec. 1(2); or 7
-15. Any individual employed to play baseball who is compensated pursuant 8
-to the terms of a contract and a collective bargaining agreement that 9
-expressly provides for wages and working conditions; 10
-(b) "Agriculture" means farming in all its branches, including cultivation and 11
-tillage of the soil; dairying; production, cultivation, growing, and harvesting 12
-of any agricultural or horticultural commodity; raising of l ivestock, bees, 13
-furbearing animals, or poultry; and any practice, including any forestry or 14
-lumbering operations, performed on a farm in conjunction with farming 15
-operations, including preparation and delivery of produce to storage, to 16
-market, or to carriers for transportation to market; 17
-(c) "Gratuity" means voluntary monetary contribution received by an employee 18
-from a guest, patron, or customer for services rendered; 19
-(d) "Tipped employee" means any employee engaged in an occupation in which 20
-he or she customarily and regularly receives more than thirty dollars ($30) per 21
-month in tips; and 22
-(e) "U.S.C." means the United States Code. 23
-Section 2.   KRS 337.275 is amended to read as follows: 24
-(1) (a) Except as may otherwise be provided by this chapter, every employer shall 25
-pay to each of his or her employees wages at a rate of not less than:  26
-1. Ten dollars ($10) an hour beginning on the effective date of this Act; 27
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-2. Eleven dollars and fifty cents ($11.50) an hour beginning on July 1, 1
-2027; 2
-3. Twelve dollars and fifty cents ($12.50) an hour beginning on July 1, 3
-2028; 4
-4. Fourteen dollars ($14) an hour beginning on July 1, 2029; and 5
-5. Fifteen dollars ($15) an hour beginning on July 1, 20230 [five dollars 6
-and eighty-five cents ($5.85) an hour beginning on June 26, 2007, not 7
-less than six dollars and fifty -five cents ($6.55) an hour beginning July 8
-1, 2008, and not less than seven dollars and twenty -five cents ($7.25) an 9
-hour beginning July 1, 2009].  10
-(b) If the federal minimum hourly wage as prescribed by 29 U.S.C. sec. 206(a)(1) 11
-is increased in excess of the minimum hourly wage in effect under this 12
-subsection, the minimum hourly wage under this subsection shall be increased 13
-to the same amount, effective on the same date as the federal minimum hourly 14
-wage rate. If the state minimum hourly wage is increased to the federal 15
-minimum hourly wage, it shall include only the federal minimum hourly rate 16
-prescribed in 29 U.S.C. sec. 206(a)(1) and shall not include other wage rates 17
-or conditions, exclusions, or exceptions to the federal minimum hourly wage 18
-rate. In addition, the increase to the federal minimum hourly wage rate does 19
-not extend or modify the scope or c overage of the minimum wage rate 20
-required under this chapter. 21
-(2) Notwithstanding the provisions of subsection (1) of this section, for any employee 22
-engaged in an occupation in which he or she  customarily and regularly receives 23
-more than thirty dollars ($3 0) per month in tips from patrons or others, the 24
-employer may pay as a minimum not less than the hourly wage rate required to be 25
-paid a tipped employee under the federal minimum hourly wage law as prescribed 26
-by 29 U.S.C. sec. 203. The employer shall establ ish by his or her records that for 27
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-each week where credit is taken, when adding tips received to wages paid, not less 1
-than the minimum rate prescribed in 29 U.S.C. sec. 203 was received by the 2
-employee. No employer shall use all or part of any tips or grat uities received by 3
-employees toward the payment of the statutory minimum hourly wage as required 4
-by 29 U.S.C. sec. 203. Nothing, however, shall prevent employees from entering 5
-into an agreement to divide tips or gratuities among themselves. 6
-(3) Nothing in this chapter shall be construed to restrict the power of any city, 7
-county, urban-county government, charter county government, consolidated local 8
-government, or unified local government to adopt and enforce minimum wage 9
-rate ordinances in excess of the req uirements of this section so long as they 10
-comply with at least the minimum applicable standards set forth in this section. 11
-In the case of a consolidated local government, the governing body of the 12
-consolidated local government is the only local governing body that may establish 13
-a minimum wage under this subsection, and the minimum wage set by that 14
-governing body shall apply countywide. 15
+Page 1
+Local Government Mandate Statement
+Kentucky Legislative Research Commission
+2026 Regular Session
+
+Part I:  Measure Information
+
+Bill Request #: 1243 Bill #: SB 16
+Document ID #: 2783 Sponsor: Sen. Reginald Thomas
+Bill Title: AN ACT relating to wages.
+
+Unit of ☒ City ☒ County ☒ Urban-County
+Government: ☒ Charter County ☒ Consolidated Local ☒ Unified Local
+
+Office(s) Impacted: All who employ persons earning minimum wage
+
+Requirement: ☒ Mandatory ☐ Optional
+
+Effect on Powers
+& Duties:
+
+☒ Modifies Existing ☐ Adds New ☐ Eliminates Existing
+
+Other Fiscal Statement(s)
+that may exist:
+☐ Actuarial Analysis ☐ Corrections Impact
+☐ Health Benefit Mandate ☐ State Employee Health Plan
+
+Part II:  Bill Provisions and the Estimated Fiscal Impact Relating to Local Government
+
+KRS 337.010 currently excludes from the definition of “employee” individuals working
+for retail stores, service industries, hotels, motels, and restaurants whose average annual
+gross sales are less than $95,000 over the preceding five years, excluding excise taxes at
+the retail level. SB 16, Section 1 would expand this exclusion by increasing the sales
+threshold to businesses with an average annual gross volume of sales of less than
+$500,000 over the preceding five years.
+
+SB 16 Section 2(a) would increase the required minimum wage payable to employees
+from the current $7.25 per hour to $10 per hour on the effective date of the Act. It would
+then increase annually on July 1 of each subsequent year through 2030, rising to $11.50
+per hour on July 1, 2027, $12.50 per hour on July 1, 2028, $14 per hour on July 1, 2029,
+and finally topping out at $15 per hour on July 1, 2030.
+SB 16 Section 2(3) would authorize cities and counties to adopt and enforce a minimum
+wage higher than the one established by the bill, provided they comply with at least the
+minimum applicable wage required under its provisions. In the case of a consolidated
+
+Page 2
+local government (Louisville-Jefferson County Metro Government is the only
+consolidated local government in Kentucky) only the local governing body would be
+authorized to establish a minimum wage, which would apply countywide.
+In 2024, LRC contacted the Kentucky League of Cities (KLC) regarding 24 RS SB 42,
+which is identical to SB 16 apart from the years referenced. KLC’s analysis was based on
+FY 2022 wage data for non-elected city employees.
+Based on KLC’s 2024 assessment, the following is the estimated total cost increases for
+all Kentucky cities combined over the next 5 years, assuming no changes in payroll (e.g.,
+no new employees hired, no retirements, etc.). The estimate includes an assumed 2.5%
+annual wage growth expense due to cost-of-living wage increases.
+Fiscal Year Minimum
+Wage ($)
+Estimated
+Annual Increase
+in Payroll ($)
+2026 10.00 181,000
+2027 11.50 633,000
+2028 12.50 1,226,000
+2029 14.00 2,789,000
+2030 15.00 4,216,000
+Total  $9,045,000
+The above estimates include Social Security and Medicare contributions but do not
+include any contributions to the County Employees Retirement System (CERS).
+The estimates in the table reflect annual wage increases only. For example, in FY 2026,
+the estimate includes only the cost of raising wages for individuals earning below $10 per
+hour up to the new minimum of $10 per hour. In FY 2027, the estimate includes only the
+cost of raising wages for individuals earning $10 per hour and less than $11.50 per hour
+up to the new minimum of $11.50 per hour.
+If additional information is received from KLC this mandate statement may be amended.
+SB 16 could have a positive fiscal impact on cities and counties that impose an
+occupational license tax on workers within their jurisdiction. Conversely, SB 16
+could have a negative fiscal impact on cities and counties that do not levy a
+percentage-based payroll tax, as higher minimum wages would increase payroll
+costs without being offset by additional occupational license tax revenues.
+Despite the estimated increase in payroll costs, SB 16 may result in a growing
+positive fiscal impact on most Kentucky cities that impose an occupational license or
+payroll tax in the first few years following passage and could result in a significant
+positive fiscal impact in later years.
+
+Page 3
+According to a July 2025 report by KLC, 170 Kentucky cities levy a tax on gross
+earnings. Cities with an occupational license tax would likely see a significantly positive
+fiscal impact due to an increased tax base for collections.
+Counties may also impose an occupational license tax. As of January 2025, the Kentucky
+Association of Counties (KACO) estimates that 87 Kentucky counties levy an
+occupational license fee, with tax rates ranging from 0.5 percent to 1.25 percent and a
+median rate of 1 percent, depending on population size. These counties would likely
+benefit from increased revenues resulting from higher wages. However, counties may
+also experience increased payroll expenses to comply with the new minimum wage
+requirements. The overall fiscal impact would vary by county and could be either positive
+or negative based on each county’s individual circumstances.
+Approximately 19,000 of the 1.14 million hourly wage earners in Kentucky currently
+earn at or below the federal minimum wage of $7.25 per hour, according to the most
+recent data available from 2024 by the U.S. Bureau of Labor Statistics (BLS). It is
+unknown how many of those minimum wage workers in Kentucky are employed by local
+governments.
+
+Data Source(s): Kentucky League of Cities; Office of the Kentucky Secretary of State;
+Kentucky Association of Counties; LRC staff; U.S. Bureau of Labor
+Statistics.
+
+Preparer: AS Reviewer: JB (MDA) Date: 1/7/26