As of New Year’s Day, the minimum wage employers must pay California employees once again jumps up, with ramifications beyond simply paying at least the new minimum rate.
The New Minimum Wage Figures
As of January 1, 2022, the minimum wage employers with 26 or more employees must pay California employees ratchets up from $14 per hour to $15 per hour. Also, effective January 1, employers with 25 or fewer employees must pay at least $14 per hour, an increase from $13 per hour.
This round of wage hikes, taking larger employers (26 or more employees) to California’s goal of $15 per hour, is the last increase for larger employers set by state law at the present time. Smaller employers are in for one more hike on January 1, 2023, when the minimum they must pay will increase to $15 per hour.
The Minimum Salary for Exempt Status Climbs, as Well
With the coming minimum wage hikes, the minimum salary for exempt status under state law, likewise, increases. As of January 1, 2022, the minimum monthly salary larger employers must pay employees in order to classify them as exempt under the executive, administrative or professional exemptions increases to $5,200 per month or $62,400 per year. Simultaneously, smaller employers will be required to pay a minimum of $4,853.33 per month or $58,240 annually in order to classify an employee as exempt.
Where, after December 31, 2021, an employer continues to classify an employee as exempt who is not paid at least the new minimum salary for exempt status, the employer may face potential liability for unpaid overtime wages, deficient pay stubs, not providing compliant meal and rest breaks and other claims.
As an alternative to paying employees a greater salary in order to maintain their classification as exempt, employers may reclassify employees from exempt to non-exempt. Non-exempt status, of course, requires the employer to track time worked and pay at an overtime rate any overtime worked, provide compliant meal and rest breaks, modify information displayed on paystubs, etc.
Employers must also keep in mind that paying the minimum salary for exempt status does not, alone, permit employers to lawfully classify employees as exempt. Other criteria also must be satisfied, including the nature of the employees’ duties, supervisorial authority, etc.
Additional Consequences of Minimum Wage Increases
The January 1, 2022 minimum wage hikes will subject employers to additional payroll expense, at least with respect to employees paid only minimum wage, due to greater rates in overtime wages, paid sick leave and the premium wage for noncompliant meal and rest breaks.
Employers who raise employees’ hourly rates to comply with the new minimum rates set by state law will not be required to give employees a new Wage Theft Prevention Act Notice reflecting the new hourly rate. The fact that employees’ paystubs notify them of their new rate satisfies the Wage Theft Prevention Act.
California employers must post notice of state minimum wage rates. The posting in English provided by the Department of Industrial Relations is here and the notice in Spanish is here. Employers should consider emailing or mailing the notice to employees working remotely.
Local Minimum Wage Hikes
Minimum wages set by local ordinances also increase in approximately 15 cities in California as of January 1, 2022. In Southern California, the cities include San Diego and, in Northern California, include Hayward, Mountain View, Oakland, San Jose, Santa Clara, Santa Rosa and Sunnyvale. Many of the increases in Northern California will lift local minimum wage rates to figures in excess of $15 per hour. The City of West Hollywood’s first minimum wage ordinance goes into effect on January 1, 2022.
The minimum wage for the City and County of San Francisco and the City and County of Los Angeles do not increase on January 1.
If we may assist with minimum wage issues or other California employment law challenges, please contact the author or your Fox Rothschild LLP counsel.
This post provides general information and does not constitute legal advice to any person with respect to any circumstance. This post does not create an attorney-client relationship with any person.