By Sharilyn R. Payne, Attorney
Noland, Hamerly, Etienne & Hoss
Since January 1, 2017, the California minimum wage has been steadily increasing pursuant to a bill that was signed into law in 2016. When the law was drafted, the goal was that by 2023, the minimum wage for all employees would be $15.00 per hour. Currently, the minimum wage for employees who work for employers with 26 or more employees is already $15.00 per hour, and for employees who work for employers with 25 or fewer employees it is $14.00 per hour. Employers have been anticipating that on January 1, 2023, the minimum wage would be $15.00 per hour for all employees, regardless of the employer’s size. However, it seems that the minimum wage will likely be even higher next year.
The California minimum wage law includes a provision requiring a further increase in the minimum wage to account for inflation. The California Director of Finance has projected inflation for the 2022 fiscal year as more than 7% higher than the prior year. As a result, Governor Newsom announced that the minimum wage is projected to go up to $15.50 per hour effective January 1, 2023 for all employees, regardless of the employer’s size.
Even if an employer already pays employees more than the anticipated minimum wage, this increase also affects the classification of employees as exempt from certain wage order provisions requiring, for example, the payment of overtime. To qualify as an exempt employee, one requirement is that an individual be paid a salary of at least two times the state minimum wage for full-time employment. With a minimum wage of $15.50 per hour, the threshold salary will go up to $64,480.00. It is currently $62,400.00 for employers with 26 or more employees, and $58,240.00 for employers with 25 or fewer employees. If an employer cannot increase its exempt employees’ salaries to that new amount, it will have to reclassify them as non-exempt employees who earn overtime and must record all hours worked.
Certain cities in California have ordinances setting their own minimum wages at a higher rate than the California rate. These increased their minimum wage rates on July 1, 2022. Employers who send their employees to perform work in other cities have to comply with the city’s rate. For example, if an employer in Salinas sends one of its employees to perform work in Emeryville where the minimum wage rate is $17.68 per hour, it must ensure that for hours worked in Emeryville, the employee is paid at least $17.68 per hour.
Employers may have heard about a proposed ballot initiative known as the “California Living Wage Act” to increase the minimum wage to $18.00 per hour over the next three years. According to the California Secretary of State, that proposal did not have enough signatures verified by county election officials and will not be on the November 2022 ballot.
Employers should continue to stay up-to-date on changes in the state and local minimum wage rates and should plan ahead to ensure that on January 1, 2023, their wage rates comply with California law.
Sharilyn Payne is an attorney with Noland Hamerly Etienne & Hoss in Salinas. Her practice focuses on labor and employment law. This article is intended to address topics of general interest and should not be construed as legal advice.
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