The minimum wage in California will soon increase to $9 per hour, the first change in minimum wage in the state since 2008. It increases again to $10 per hour on January 1, 2016. California’s minimum wages are higher than the federal minimum of $7.25. For example, San Francisco’s minimum has been $10.74 per hour since January 2014 and San Jose’s has been $10.15, with proposals to raise San Diego’s minimum to $13.09.
California employers must prepare for the change in the minimum wage rate in various ways to ensure compliance with state enforcement agencies and avoid charges of “wage theft,” or not paying minimum wage for all labor hours their employees work.
Pay practices affected by the minimum wage increase include:
- overtime rates of pay
- exempt/nonexempt classifications
- meal and lodging credits
- commission issues
- notice requirements
Here are issues California employers should review or should have already reviewed to prepare for the minimum wage increase:
Review Bases Salary of Exempt Employees
Exempt employees are not entitled to overtime pay for hours worked over eight hours in one day or 40 hours in one week and must be paid two time the minimum wage. Employers must review the base salaries of exempt employees to ensure compliance with the minimum wage increase. If exempt salaries are not adjusted to meet the double the minimum wage amount, employers will be in noncompliance if they don’t pay overtime. Currently the exempt annual salary requirement is $33,280, but will change to $37,440 July 1. Salaried administrative employees who make $36,000 per year will be entitled to overtime pay July 1.
Review the Wage Theft Protection Act Notice
Employers should review the Wage Theft Protection Act to make sure their pay practices will comply. Employers must provide written notice to employees about their jobs that include their wage rate. Employers don’t have to issue new wage notices for the July 1 increase as long as the new rate show on pay stubs, but should review notices and pay stub information.
Review Your Timekeeping System and Policies
Employers should review their timekeeping systems and policies for compliance with the Wage Theft Protection Act and increased minimum wage rate. They should communicate the new minimum wage rate to employees, as well as timekeeping policies that prohibit off the clock work and appropriate reporting procedures for any violations.
Review Employee Classifications
Proper employee and independent contractor classifications are important for compliance with the new minimum wage rate. Employers should review employee classifications to ensure they are paying the minimum wage to employees as required by law and avoid any appearance or charges of wage theft for unpaid minimum wages.
Review Employee Wage Agreements
Employers should review employee wage agreements for compliance. California law prohibits employees from agreeing to work for less than state minimum wage, even under collective bargaining.
Exceptions to the Minimum Wage Requirement
Employees who are exceptions to the minimum wage requirement include outside salespersons, employees who are the parent, spouse, or child of the employer, regularly indentured apprentices for the State Division of Apprenticeship Standards, learners paid not less than 85 percent of the minimum wage during the first 160 hours of employment in new occupations, and mentally and/or physically disabled employees and nonprofit organizations that employ disabled workers who have a special DOL license for sub-minimum wages.
Changes to the minimum wage are not restricted to California. Delaware, Michigan, Minnesota, and Seattle all have incremental minimum wage increases planned. The proposed federal minimum wage increase to $10 per hour is currently stalled but would affect all employers across the nation.