California Minimum Wage to Rise to $10 per Hour

Yesterday, Governor Jerry Brown signed legislation that will raise California’s minimum wage in two steps, from its current level of $8 per hour to $9 per hour on July 1, 2014, with a further increase from $9 per hour to $10 per hour on January 1, 2016.

The current California minimum wage of $8 per hour has been in effect since 2008.  The current federal minimum wage of $7.25 per hour is not scheduled to change, but since employers in California are subject to both the federal and state minimum wages, employees who work in California must be paid the higher of the state or federal minimum.  California’s minimum wage is therefore likely to control for the foreseeable future.

The minimum wage increase will affect not only low wage earners, but also salaried employees who are classified as exempt from overtime under any of California’s “white-collar” exemptions for administrative, executive and professional employees.  These white-collar workers must be paid at least twice the minimum wage per month, calculated based on full-time work (40 hours per week).  As a result, any increase in the minimum wage automatically increases the minimum salary for these white-collar exempt employees.

Since 2008, the minimum salary for white-collar exempt employees in California has been $33,280 per year, or $2,773.33 per month.  When the minimum wage goes up to $9 per hour on July 1, 2014, the minimum salary for administrative, executive and professional white-collar employees will increase to $37,440 per year, or $3,120 per month.  Any failure to pay the minimum required salary to these employees will render them nonexempt, and therefore subject to all overtime, meal period and rest period requirements.

California law does not allow the minimum salary to be reduced or pro-rated for those white-collar employees who work part-time.  As a result, part-time white-collar employees must be paid the minimum salary or more on a monthly basis, regardless of how many (or how few) hours they work.

Employers affected by the increased minimum wage should make sure any required changes—both to hourly pay rates and salaries (for full-time and part-time exempt employees)—are fully implemented by July 1, 2014 for the first increase to $9 per hour, and by January 1, 2016 for the second increase to $10 per hour.

Aaron Buckley – Paul, Plevin, Sullivan & Connaughton LLP – San Diego, CA

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