Be Prepared for Statewide and Local Minimum Wage Increases

California’s Minimum Wage Increases on January 1 Some Municipalities Will Follow Suit Throughout 2016

California’s minimum wage is increasing in steps. It went to $9.00 per hour on July 1, 2014. It increases to $10.00/hour on January 1, 2016.

This rise has numerous repercussions. California’s minimum wage landscape has become fairly chaotic, with many cities and counties dictating even higher rates within their boundaries, with increases at various times. An employer is required to pay the highest minimum wage rate applicable to each locale where it does business.

The City and County of San Francisco went to $12.25 as of May 1, 2015. Its next general increase will be on July 1, 2016, up to $13.00. However, the minimum wage applicable to for-profit companies contracting with San Francisco goes to $13.34 on January 1, 2016.

Oakland, which has been at $12.25 an hour since March 2015, will go to $12.55/hour as of January 1, 2016.

The City of Los Angeles and Los Angeles County are both increasing their minimum wage to $10.50 on July 1, 2016, the first of such upward adjustments scheduled over the next several years.

These are examples only. Every California employer must verify what rate or rates apply to its workforce. There are at least 14 municipalities statewide with their own minimum wage levels and dates of increase.  A business should regularly check for any such local ordinance(s) that may affect its operations in any locale where it has employees. See UC Berkeley’s compilation of California municipalities with minimum wage laws as one possible resource.

There are other costs to California employers potentially affected by a rise in the “minimum wage floor.” Increases tend to push up other hourly wage rates for companies that want to keep pace at some proportion above the minimum. Higher wage rates also lead to higher payments on employment taxes as well as workers’ compensation premiums.

The qualifying salary rate will also increase for California executives and administrators otherwise eligible for overtime exemption. Such salary must be at least two times the minimum wage for a 40 hour week. The 2015 minimums of $720 per week and $3,120 monthly will thus increase to $800 per week and $3,467 monthly as of January 1, 2016.

An increase in minimum wage levels is all the more reason to ensure all wage and timekeeping practices are in full compliance with applicable federal and state laws. For example, improperly calculated overtime, faulty policy and procedure on meal and rest periods, or substandard clock-in and clock-out systems and rules can create expensive challenges.

For information concerning wage levels and related workplace practices, as well as model employee policies and forms, contact one of our attorneys, Tim Bowles, Cindy Bamforth, or Helena Kobrin.

Helena Kobrin, November 24, 2015