On April 4, 2016, California Governor Jerry Brown signed legislation that will raise the statewide minimum wage to $15 per hour by 2022. This Client Alert will give you an overview of what to expect and the salary impacts this will have on both non-exempt (hourly) and exempt (salary) employees. As we receive any additional information about this new law, we will update here.
Non-Exempt (Hourly) Employees
This legislation will raise the statewide minimum wage according to the following schedule:
- $10.50 per hour, effective January 1, 2017
- $11.00 per hour, effective January 1, 2018
- $12.00 per hour, effective January 1, 2019
- $13.00 per hour, effective January 1, 2020
- $14.00 per hour, effective January 1, 2021
- $15.00 per hour, effective January 1, 2022
If your locality has a higher minimum wage requirement, you must pay the higher wage as per the local ordinance.
Exempt (Salary) Employees
In order to be considered exempt, the position must meet two requirements – a duties test and a salary test. In general, most exempt positions must make at least twice the minimum wage annually. For the majority of exempt positions, this will mean the following salary requirements to maintain exempt status:
- $43,860 per year, effective January 1, 2017
- $45,760 per year, effective January 1, 2018
- $49,920 per year, effective January 1, 2019
- $54,080 per year, effective January 1, 2020
- $58,240 per year, effective January 1, 2021
- $62,400 per hour, effective January 1, 2022
The minimum exempt salary is the same statewide, regardless of whether your locality has a separate wage ordinance.
Please note that inside commissioned sales and computer software exemptions have separate salary requirements. If you have positions that are exempt due to this type of classification, please contact Katie Spero at katie@craftbeerattorney.com to discuss.
Delay in Implementation for Small Businesses
For employers with 25 or fewer employees, there is a one year delay in implementation of the statewide minimum wage – in other words, the wage increase above will not begin until January 1, 2018, and will not be complete until January 1, 2023.
For non-exempt (hourly) employees, small businesses must still follow the rules of their specific locality, and pay a higher hourly wage to non-exempt (hourly) employees if required. Many localities also have one year delay provisions for small business, but not all. If you have questions about your local minimum wage requirements, please contact Katie Spero at katie@craftbeerattorney.com to discuss.
“Off Ramp” Provision
Built into the legislation is an “off ramp” provision, which allows the Governor to pause any schedule increase for one year based on economic or budget conditions. This “off ramp” provision will expire once the $15 per hour minimum wage has been reached.
If you have any questions, please contact Katie Spero at katie@craftbeerattorney.com to discuss.