|
Compliance Matters
™ Newsletter
|
|
|
|
GOVERNOR BROWN SIGNS HISTORIC LEGISLATION INCREASING CALIFORNIA'S MINIMUM WAGE TO $15.00 BY 2022
|
Yesterday morning, Governor Brown signed into law significant increases to the minimum wage rate for California employers. Currently, with a minimum wage of $10.00 an hour, California is already tied with Massachusetts for the highest minimum wage of any state in the US. However, this new law will increase the minimum wage to $15.00 an hour by 2022.
What This New Law Means for You
The number of employee that a business has will dictate when the increases will occur. The new law distinguishes between larger employers (those with 26 or more employees) and smaller employers (those with 25 or fewer employees). Implementation is delayed for one year for those smaller employers. The charts below shows you the annual increases.
Larger Employers (with 26 or more employees)
|
Effective Date
|
Minimum Hourly Wage
| |
January 1, 2017
|
$10.50
| |
January 1, 2018
|
$11.00
| |
January 1, 2019
|
$12.00
| |
January 1, 2020
|
$13.00
| |
January 1, 2021
|
$14.00
| |
January 1, 2022
|
$15.00
|
Smaller Employers (with 25 or fewer employees)
|
Effective Date
|
Minimum Hourly Wage
| |
January 1, 2018
|
$10.50
| |
January 1, 2019
|
$11.00
| |
January 1, 2020
|
$12.00
| |
January 1, 2021
|
$13.00
| |
January 1, 2022
|
$14.00
| |
January 1, 2023
|
$15.00
|
Under this new law, annual increases may be temporarily suspended by the Governor based on certain economic determinations. Additionally, beginning in 2024, the minimum wage rate will be reviewed and adjusted on an annual basis using a formula which relies in part on the consumer price index ("CPI").
Cities, Counties and Government Contracts May Provide For An Even Higher Minimum Wage. Employers must also keep in mind that many city, county and industry specific ordinances have established minimum rates of pay that are higher than the state's minimum wage. For example, whereas all businesses in the City of Los Angeles that are not covered by the City's Hotel Minimum Wage Ordinance must pay at least $10.50/hr. as of July 1, 2016, larger hotels (300+ rooms) must pay a minimum wage of $15.37/hr. City of Los Angeles contractors (i.e., those who do business with the City) have their own minimum wage depending upon whether the company provides health benefits. If it does, that rate will be $11.17/hr. on July 1st. Those contractors that don't provide health benefits must pay a minimum wage of at least $12.42/hr. as of July 1st.
Higher Salaries And Overtime Rates. The impact of the increases will go well beyond their direct effect on hourly-paid employees. For example, the new rules will effectively set new minimum salaries for non-exempt employees who are paid on salary basis. Also, since the salary of these overtime eligible employees may only cover the first 8 hours worked in the day (and no more than 40 hours in a workweek), any overtime worked after that will have to be paid at the new higher rates. No contract which the employee may sign can alter this minimum obligation.
Overtime Exemptions Are More Costly. Another significant impact of the minimum wage increase is that it will cause an increase in the minimum salary required for employees to be properly classified as overtime exempt under the so-called "white collar" exemptions (i.e., the executive, administrative and professional exemptions). To even be eligible for one of these overtime pay exemptions, the employee in question must be paid a minimum salary which is at least twice the state's minimum wage. At $10.00 per hour currently, that's a salary of $41,600. Beginning January 1st, that figure is $2,080.00 per year higher (i.e., $43,680.00) and will increase each year as the minimum wage increases.
Additionally, employers should keep in mind that the federal law requiring minimum wage and overtime payments is about to be overhauled to the detriment of employers. The U.S. Department of Labor ("DOL") is currently in the process of updating its overtime regulations to substantially increase the annual compensation necessary for an employee to qualify for a so-called "white collar" exemption under federal law. While a final number has not been determined, early drafts of the new rules indicate that the new minimum figure likely will be set upwards of $50,000.00.
Review Rules Tied To The Minimum Wage. Keep in mind that there are other rules which are directly tied to the minimum wage rate, such as the overtime exemption for certain commissioned salespeople and the minimum payment that must be made to enable an employer to require employees to provide their own "tools and equipment customary to the trade". Those rules require the employee to earn no less than 130% of the state minimum wage. As the minimum wage rises, so too will these minimum payments.
What Employers Should Do?
Employers should proactively identify the policies, work rules, agreements and economic decisions that may be affected by the increases well in advance of their effective dates and work with labor counsel to devise strategies to meet the company's objectives. Also, watch the news reports for any changes. For example, the City of Santa Monica is about to enact its own minimum wage modeled on the Los Angeles ordinance with a different (higher) rate for hotels than other non-hotel businesses. Long Beach, San Francisco and Emeryville also have their own minimum wage ordinances.
If you have any questions, please call your firm contact at (818) 508-3700 or visit us online at www.brgslaw.com.
Richard Rosenberg
Katherine Hren
Ballard Rosenberg Golper & Savitt, LLP
|
|
|
|
|
|
|
