CALIFORNIA’S MINIMUM WAGE GOES UP – THE RAMIFICATIONS ARE BROADER THAN JUST THE HOURLY WAGE

As of January 1, 2023, California’s minimum wage increased to $15.50 per hour, regardless of the size of the workforce.
Here’s a checklist of some important workplace issues that the California minimum wage increase affects:

1. Update Posters: California employers should make sure their workplace posters are up-to-date and reflect the correct minimum wage requirements.
2. Exempt Position Salary Requirements: Under federal and state law, employees who meet certain exemptions (i.e., executive, administrative, or professional) are exempt from minimum wage and overtime requirements if they meet the applicable exemption tests. The threshold minimum salary requirement for exempt employees in California is at least two times the state minimum wage. This salary test is much higher than the FLSA. As such, with the new state minimum wage, effective January 1, 2023, the minimum salary for a California employee classified as exempt under the executive, administrative, or professional category, is $64,480.00. If you have exempt employees in California making a salary less than $64,480.00 annually, there is a good chance they are not properly classified as exempt.
3. Local Minimum Wage Ordinances: There are a multitude of local ordinances in California that require employers to pay more than the state minimum wage to non-exempt employees, as well as industry-specific requirements in certain jurisdictions. Many of these ordinances update and become effective annually on January 1 or on July 1. Employers should check the current local minimum wages in California and set a reminder to check for mid-year updates to ensure compliance. This is particularly important given the increase in remote work environments where an employee’s work location may no longer be in-office and instead, located within a city or county that has a local ordinance that requires an hourly rate higher than California’s minimum wage.
4. Location, Location, Location: California has one of the highest minimum wages in the country. Many cities in the bay area have local minimum wages that are currently over $16 an hour. Some are over $17 an hour. These minimum wages apply to all employees working the state/jurisdiction. With remote work becoming so popular, even for hourly workers, it is very important to know where your employees are performing their work. Often, employers of remote workers are completely unaware of where the work is being performed. If you have an exempt employee who was making a salary of $55,000 and moves to California to complete his work, or even works there temporarily, the employee is likely no longer properly classified as exempt. Hourly employees must be paid the higher of the California and the local minimum wage. If you have remote workers, it is very important to know exactly where they are working from or you could be stuck with a problematic wage and hour claim or lawsuit down the road.
5. Do Not Rely on Your Payroll Company: California employers should remain vigilant about compliance without relying blindly on an outside payroll company to avoid wage and hour pitfalls that result in costly litigation, that employers typically bear alone. There are specific nuances of potentially overlapping regulations and realities of today’s remote or hybrid work environments and the payroll companies, even the larger ones, rarely keep up with everything, including local minimum wages and often fail to make the adjustments or notify the employer when the law changes/wage goes up. Most of the agreements that employers sign with payroll companies, place the burden squarely on the employer when a mistake is made. Do not rely on others to ensure minimum wage compliance.