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Navigating California's State & Local Minimum Wage Requirements

The California state minimum wage increased as of January 1, 2017, with additional annual increases scheduled through January 1, 2023, when the minimum wage for all employees will reach $15.00/hour.  California Labor Code § 1182.12; Minimum Wage Order 2017.  Until then, employers with 25 or fewer employees are subject to a lower minimum wage requirement than those with more than 25 employees.  For example, as of January 1, 2017, the minimum wage for employers with 25 or fewer employees is $10.00/hour, but is $10.50/hour for employers with more than 25 employees.

For purposes of counting the number of employees that they have, employers should include all employees, and not just those who are hourly and so subject to receiving the minimum wage.  Also, the Labor Commissioner takes the position that an employer that uses both direct hires and temporary employees must count both groups in determining its total number of employees for minimum wage purposes.

Employers should keep in mind that a number of local governments now impose their own minimum wage requirements, many of which are higher than the California state minimum.  Both Los Angeles City and Los Angeles County have their own minimum wage laws, as do a number of Southern California cities, including Malibu, Pasadena, San Diego, and Santa Monica.  Some of these local jurisdictions impose increases as of July 1, with subsequent annual increases. Where local laws provide greater benefits than the state law, the local law controls.  Because of this, it is critical that employers be aware of whether their local jurisdiction imposes its own minimum wage, and how the local requirements operate.  Information about local ordinances typically can be obtained from the local government website.

The increases in the state minimum wage also impact the monthly minimum salary requirement for exempt employees, which typically is two times the state hourly minimum wage for full time employment, assuming a 40 hour workweek. Thus, employers need to be sure that their exempt employees are being paid a salary that is consistent with the increased hourly minimum wage.  Local minimum wage requirements do not impact salary levels for exempt employees.

Employers must take the time to understand which minimum wage standards apply to them, both in terms of employee count and geographic location.  Investing the resources necessary to be compliant now will help employers avoid far more serious costs down the road. 

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