California employers have had many difficulties over the past years, not only with the ongoing and changing COVID issues, but also with employee retention. Another challenge employers face this year comes in conjunction with the recent minimum wage increase due to SB3. This minimum wage hike became effective in California as of January 1, 2022.[i]
Almost every employer in California will begin paying their employees a new and higher minimum wage. This is either the new state or local minimum wage – whichever is higher – at the start of 2022. Beginning January 1, 2022, for employers of 26 or more employees, the California state minimum wage went up to $15.00 per hour. For those employers of 25 or fewer employees, minimum wage is $14.00 per hour. Exempt employees must be paid a minimum of $62,400.00 annually for employers of 26 or more employees and $58,240.00 annually for employers of 25 or fewer employees.[ii]
Moreover, employees defined as “learners,” or those new employees working in occupations in which they have no previous similar or related experience can be paid at 85% of minimum wage during the first 160 hours of employment. There are no clear guidelines on what exactly establishes an employee as a “learner,” putting the burden on the employer to make determine and establish what employee is considered a “learner” for payroll purposes.
These new higher wages increase by a fixed dollar amount, while others are tied to the regional consumer price index.[iii] Given local wage increases vary across municipalities and according to the number of employees, employers should review their individual city ordinances and follow wage posting requirements to ensure compliance.
In fact, more than 35 California cities and counties have passed additional minimum wage requirements.[iv] Employers should keep in mind that when paying employees, employers should follow the stricter wage standard i.e., the one that is the most beneficial to the employee. Employers are responsible to assure they conform to the new rules for their distinct locality in which their employees work. The UC Berkeley Labor Center publishes regular updates employers should review regularly to assure they are in compliance.[v]
Various questions come to the surface with respect to the new minimum wage application, which individuals it applies to, and those it does not. For instance, people in the service industries, such as waiters and waitresses, who receive a significant portion of their compensation from tips are not exempted from California minimum wage laws. They must be paid the same minimum wage as other California employees.[vi]
However, the new minimum wage laws do not apply to (1) mentally or physically handicapped employees working for authorized nonprofits and rehabilitation facilities;[vii] (2) employer’s spouse, child, or parent;[viii] (3) student employees, camp counselors, and program counselors of organized camps, who only need to be paid eighty-five percent (85%) of the minimum wage;[ix] (4) participants in national service programs such as AmeriCorps;[x] (5) outside salespeople – or an employee who spends more than half his/her working hours away from the employer’s place of business, selling items or obtaining orders;[xi] (6) individuals classified as independent contractors rather than employees under California employment law.[xii]
Employers must post information on wages, hours, and working conditions at a worksite area that is accessible to employees. Employers must also include the updated wage rate on their employees’ pay stubs.
While California’s Governor does have the ability to suspend a scheduled wage increase if negative budgetary conditions emerge or there is a significant economic slowdown (negative job growth combined with negative retail sales for a specified time period), employers should get accustomed to these minimum wage hikes. They will surely continue to be implemented in the years to come.
[i] New Minimum Wage Phase in Requirement 2017-2023 SB 3 Frequently Asked Questions, California Department of Industrial Relations, (Dec. 2016), https://www.dir.ca.gov/dlse/sb3_faq.htm.
[ii] Cal. Code Regs., tit. 8, § 11040.
[iii] L.A.’s minimum wage to rise to $16.04 in July, Los Angeles Times, (Feb. 3, 2022), https://www.latimes.com/california/story/2022-02-03/la-minimum-wage-increase-16-hour.
[iv] California City and County Current Minimum Wages, UC Berkeley Labor Center, (Jan. 31, 2022), https://laborcenter.berkeley.edu/inventory-of-us-city-and-county-minimum-wage-ordinances/#s-2.
[v] UC Berkeley Labor Center, UC Berkeley Labor Center, https://laborcenter.berkeley.edu/.
[vi] New Minimum Wage Phase in Requirement 2017-2023 SB 3 Frequently Asked Questions.
[vii] Lab. Code, § 1191.5.
[viii]Minimum Wage, California Department of Industrial Relations, (Dec. 2021), https://www.dir.ca.gov/dlse/faq_minimumwage.htm.
[ix] Lab. Code, § 1182.4.
[x] 4 Things Most People Don’t Know About AmeriCorps, Madeline Jacobson, Careers in Government, (Oct. 21, 2013), https://www.careersingovernment.com/tools/gov-talk/career-advice/4-things-people-dont-know-americorps/.
[xi] Minimum Wage.
[xii] New Minimum Wage Phase in Requirement 2017-2023 SB 3 Frequently Asked Questions.