Today Governor Jerry Brown signed Senate Bill 3, which will gradually increase the state’s minimum wage from its current level of $10 per hour to $15 per hour by 2022. Both houses of California’s legislature passed the bill on March 31 to great fanfare, but the Governor waited until today to give formal approval, presumably to avoid signing the bill into law on April Fool’s Day.
The new law will increase the state’s minimum wage from $10 per hour according to the following schedule:
For employers with 26 or more employees:
January 1, 2017: $10.50 per hour
January 1, 2018: $11.00 per hour
January 1, 2019: $12.00 per hour
January 1, 2020: $13.00 per hour
January 1, 2021: $14.00 per hour
January 1, 2022: $15.00 per hour
For employers with 25 or fewer employees, each increase will be delayed by one year as follows:
January 1, 2018: $10.50 per hour
January 1, 2019: $11.00 per hour
January 1, 2020: $12.00 per hour
January 1, 2021: $13.00 per hour
January 1, 2022: $14.00 per hour
January 1, 2023: $15.00 per hour
Beginning in 2024, the minimum wage will increase annually up to 3.5 percent based on the United States Consumer Price Index for Urban Wage Earners and Clerical Workers, rounded to the nearest ten cents. The new law does not preempt local minimum wage ordinances that have been adopted by several cities in California in recent years, so local governments remain free to enact minimum wages higher than the state minimum.
Beginning July 1, 2018, the new law will also phase in paid sick leave for in-home supportive care workers, who were excluded from the state’s paid sick leave law that took effect in 2015.
The new law will also gradually increase California’s minimum salary for so-called “white collar” (executive, administrative, and professional) exempt employees, which is set at twice the state minimum wage for a 40-hour work week. Under the current $10 state minimum wage, California’s minimum salary is $800 per week or $41,600 per year. Unless the legislature acts to de-couple the minimum exempt salary from the minimum hourly wage, the minimum salary for white collar exempt employees in California will rise according to the following schedule:
January 1, 2017: $840 per week / $43,680 per year
January 1, 2018: $880 per week / $45,760 per year
January 1, 2019: $960 per week / $49,920 per year
January 1, 2020: $1,040 per week / $54,080 per year
January 1, 2021: $1,120 per week / $58,240 per year
January 1, 2022: $1,200 per week / $62,400 per year
The minimum salary for white collar exempt employees under the FLSA is currently just $455 per week ($23,660 per year). However, the Obama administration’s plan to change the FLSA regulations to raise that minimum to at least $970 per week ($50,440 per year), and then annually adjust the minimum to keep pace with inflation, is likely to take effect in the summer or fall of 2016. Any white collar employee in California must be paid a salary high enough to satisfy both the state and federal minimums to be exempt from overtime for hours worked in excess of eight per day or 40 per week.
Employers should immediately begin planning to adjust to the new law, which critics describe as a “job-killer.” The economic impact of a $15 minimum wage remains to be seen, and given the implementation schedule the new law’s effects will be gradual. But at a minimum we know this much is true: (1) Minimum wage workers who remain employed will see a wage increase; and (2) Those who are laid off or cannot find employment under the new law will have an effective minimum wage of zero.
Aaron Buckley – Paul, Plevin, Sullivan & Connaughton LLP – San Diego, CA
On Tuesday the Los Angeles City Council voted to raise the city’s minimum wage to $15 an hour by 2020. Los Angeles will join San Francisco, San Jose and Oakland as California cities with minimum wages higher than both the federal and state minimum wages.
The federal minimum wage is $7.25 per hour. California’s state minimum wage is currently $9 per hour, and is scheduled to rise to $10 per hour on January 1, 2016. Employees must be paid the highest minimum wage in effect, which in California is the state minimum wage except in cities that have established their own higher minimum wages.
The City of Los Angeles does not currently have its own minimum wage, but on Tuesday the City Council voted to establish a city minimum wage of $10.50 per hour effective July 1, 2016. Thereafter the city’s minimum wage will increase to $12.00 on July 1, 2017; $13.25 on July 1, 2018; $14.25 on July 1, 2019; and $15.00 on July 1, 2020. Beginning in 2022 the city’s minimum wage will be adjusted for inflation on July 1 of each year.
California cities that already have minimum wages higher than the state minimum wage include San Francisco (currently $12.25 per hour and scheduled to rise to $13 on July 1, 2016; $14 on July 1, 2017; and $15 on July 1, 2018; followed thereafter by annual adjustments for inflation each July 1); San Jose (currently $10.30 per hour and adjusted each January 1 for inflation); and Oakland (currently $12.25 per hour and adjusted each January 1 for inflation).
Meanwhile, San Diego’s minimum wage is on hold. In October 2014 the San Diego City Council voted to establish a city minimum wage that would rise to $11.50 per hour by January of 2017, and would also require employers to provide their employees with up to 40 hours of paid sick leave each year. But opponents of the ordinance gathered enough petition signatures to put the measure to a public vote. It will go into effect only if it survives a June 2016 referendum.
It is becoming increasingly clear that employers can no longer assume that compliance with federal and state laws is enough. The trend of cities establishing their own minimum wages appears to be picking up steam. Employers should take steps to stay abreast of, and comply with, all local minimum wages and other local mandates.
Northern California Voters Approve Minimum Wage and Paid Sick Leave Measures; San Diego Ordinance on Hold
In September we posted a discussion of the new California paid sick leave law, which takes effect on July 1, 2015. In last week’s general election, Oakland voters signaled they think the state’s paid sick leave mandate does not go far enough. They overwhelmingly approved a paid sick leave initiative modeled on one passed by San Francisco voters in 2006, and that goes well beyond the new state law’s requirements. And voters in both cities approved minimum wage increases that will raise their local minimum wages far higher than either the current federal minimum of $7.25 per hour, or the California state minimum of $9 per hour (scheduled to rise to $10 in 2016).
The Oakland initiative, Measure FF, requires employers to provide their Oakland employees with one hour of paid sick leave for every 30 hours worked beginning in March 2015. Employers with fewer than 10 workers can cap the amount of paid sick leave at 40 hours per year, but employers with 10 or more workers must provide up to 72 hours per year. This is three times the state paid sick leave minimum of three days or 24 hours per year.
That same initiative will increase the minimum wage for employees working in Oakland to $12.25 per hour beginning in March 2015, followed thereafter by annual cost of living increases. The Oakland measure prohibits employers from funding required wage increases by reducing any non-management employee’s benefits. The initiative also requires hospitality employers that collect service charges from customers, including room service delivery chargers or baggage carrying charges, to pass those fees on to their hospitality workers.
San Francisco has long had a minimum wage higher than the state minimum. But in November that city’s voters approved Proposition J, which will raise the current city minimum wage still higher, from its current level of $10.74 per hour to $12.25 per hour on May 1, 2015; $13 per hour on July 1, 2016; $14 per hour on July 1, 2017; and $15 per hour on July 1, 2018, followed thereafter by annual cost of living increases.
Voters in nearby Berkeley approved Measure Q, which calls on the City Council to adopt an ordinance similar to the Family Friendly Workplace Ordinance that San Francisco adopted in October 2013, which allows employees to seek changes to their working arrangements to care for family members with serious health conditions. Measure Q also authorizes the Berkeley City Council to send letters to federal and state officials asking for government employees to have the right to shorter work hours if doing so would not cause operational problems.
Meanwhile, in southern California the San Diego City Council’s minimum wage and paid sick leave ordinance, which we discussed in a July post, has hit a roadblock. In July the council voted to establish a city minimum wage of $9.75 per hour in January 2015, $10.50 per hour in January 2016, and $11.50 per hour in January 2017. The ordinance would also have required employers to provide up to five days or 40 hours of paid sick leave per year beginning in July 2015. The measure met with stiff opposition in the business community, which launched a petition drive to require the council to either rescind the ordinance or to allow the city’s voters to decide its fate. In October the measure’s opponents submitted more than enough signatures, and shortly thereafter the council voted to submit the issue to the voters. The measure is now on hold, and will take effect only if approved by the voters in the June 2016 primary election.
Municipal governments enacting their own minimum wage, paid sick leave and other measures is a relatively new trend that creates headaches for employers by requiring them to apply different rules to different groups of employees based on where they work. But the trend is likely to continue for the foreseeable future, so employers should take all necessary steps to stay abreast of, and comply with, these new local mandates.
Earlier this week the San Diego City Council voted to join San Francisco, San Jose and several other cities across the nation as municipalities with higher minimum wages than those established by federal or state law. The council also voted to require employers to provide paid sick leave. The council is scheduled to vote again on July 28 to officially adopt the ordinance. The 6-3 vote in favor of the measure is sufficient to override an expected veto by Mayor Kevin Faulconer.
Currently the federal minimum wage is $7.25 per hour. California’s minimum wage increased from $8 to $9 per hour on July 1 of this year, and is scheduled to rise again to $10 per hour on January 1, 2016. Employees must be paid the highest minimum wage in effect, which means workers in San Diego are currently subject to the state minimum wage.
The vote by the City Council will, for the first time, establish a minimum wage within the City of San Diego that will be higher than both the federal and state minimums. San Diego’s minimum wage will apply to all private sector employees who work at least two or more hours per calendar week within the city limits. These employees must be compensated for each hour worked within the city limits at the following minimum hourly rates:
Beginning January 1, 2015: $9.75
Beginning January 1, 2016: $10.50
Beginning January 1, 2017: $11.50
Beginning January 1, 2019, the city’s minimum wage will increase in January of each year based on the prior year’s increase in the Consumer Price Index.
San Diego’s new paid sick leave mandate takes effect April 1, 2015, and requires employers to provide employees with one hour of paid sick leave for every 30 hours worked within the city limits, with a maximum accrual of 40 hours per year. Employees may begin using paid sick leave on July 1, 2015. Paid sick leave may be used for the employee’s own illness or medical appointment, to care for an ill family member, or to take time off for reasons related to domestic violence.
Employers may require paid sick leave to be used in increments of at least two hours, and may limit an employee’s use of paid sick leave to 40 hours per year. Employees will be allowed to carry over unused sick leave to the following year, but employers are not required to pay out unused sick leave upon the employee’s separation from employment. Employers already providing paid sick leave that meets the requirements of the ordinance are not required to provide any additional sick leave.
The measure also requires employers to post notices of the new ordinance within the workplace by April 1, 2015, and to provide each new employee with written notice of the minimum wage and paid sick leave requirements after that date. The city will make notice materials available to employers by April 1, 2015.
The ordinance also creates a city Enforcement Office to enforce the minimum wage and paid sick leave requirements, and establishes a civil penalty for most violations of up to $1,000. Violations of the notice requirement may be assessed at $100 per employee, up to a maximum of $2,000.
San Diego business leaders are considering a referendum to overturn the ordinance. In the meantime, employers who have employees working within the San Diego city limits (even if the employer is based outside the city) should plan to comply with the new minimum wage, sick leave, and notice requirements.
Aaron Buckley – Paul, Plevin, Sullivan & Connaughton LLP – San Diego, CA