California Raises Minimum Wage to $15 Per Hour

On April 4, 2016, Governor Brown signed Senate Bill 3, which will increase California’s minimum wage annually, reaching $15 per hour for employers with at least 26 employees by January 1, 2022.  This bill enacts the highest statewide minimum wage in the nation.

Therefore, for employers with at least 26 employees, California’s minimum wage will increase on the following schedule:

January 1, 2017 through December 31, 2017: $10.50 per hour.
January 1, 2018 through December 31, 2018: $11 per hour.
January 1, 2019 through December 31, 2019: $12 per hour.
January 1, 2020 through December 31, 2020: $13 per hour.
January 1, 2021 through December 31, 2021: $14 per hour.
Beginning January 1, 2022: $15 per hour.

Employers with 25 or fewer employees will follow a minimum wage schedule trails the above schedule by one year.  For these smaller employers, the minimum wage will be $10.50 per hour starting on January 1, 2018, $11 per hour on January 1, 2019, and continuing on this schedule until reaching $15 per hour on January 1, 2023.

The Governor has the ability to suspend the above minimum wage increases if certain economic factors indicate that the state is in recession.

Palay Law Incorporated notes that, because California’s "salary basis" test for exempt vs. non-exempt employees is directly tied to the state’s minimum wage, these increases will raise the threshold above which workers may be considered exempt.  Exempt employees must earn at least twice the state’s minimum wage for full-time employment, meaning that under the current $10 per hour minimum wage, exempt employees must earn an annual salary of $41,600 ($10 per hour x 2 x 40 hours per week x 52 weeks per year).  Under a $15 per hour minimum wage, the minimum annual salary jumps to $62,400 ($15 per hour x 2 x 40 hours per week x 52 weeks per year).

Employees who are not sure if they are receiving proper minimum wages, or if they are properly considered "exempt," are encouraged to contact Palay Hefelfinger APC for a consultation.