CA Minimum Wage
Overview of California's Minimum Wage Increase
Governor Brown and the Califonria Legislature have crafted compromise legislation on increasing California's minimum wage rate to $15 per hour in annual steps by 2022.
Currently, the minimum wager in California is $10 per hour, which went into effect on January 1, 2016. By comparison, the federal minimum wage is currently $7.25 per hour. In situations where there are local minimum wage rates are higher than the federal rate, the law that is applicable to the employee is the highest minimum wage rate. This includes rates set by municipalities within California that may have rates higher than the current California minimum wage rate in effect.
Employers with 26 or more employees will be required to comply with the following schedule in minimum wage increases:
- $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
Employers with 25 or fewer employees will not feel thie effect of this law until one year later, based on the following schedule:
- $10.50 per hour effective Janaury 1, 2018
- $11.00 per hour effective January 1, 2019
- $12.00 per hour effective January 1, 2020
- $13.00 per hour effective January 1, 2021
- $14.00 per hour effective January 1, 2022
- $15.00 per hour effective January 1, 2023
After the minimum wage has achieved the $15 per hour level, each year before August 1st, the California Director of Finanance will calcluate any cost-of-living increase for the following year based on the U.S. Consumer Price Index.
The minimum wage law has a provision to slow the step-up increases depending on economic conditions around the state. Each July in the years from 2017 to 2021, the California Director of Finance will make a determination if the State's economy can support the minimum wage increase. Based on that determination, the Governor may then suspend the minimum wage increase for the following year; however, this can only be done twice during these years of step-up increases.
During the years of minimum wage increases, employers need to review their exempt employees to ensure the qualification level of two times the state minimum wage is being met for full-time employment. When the minimum wage reaches the $15 per hour level, this means exempt employees must earn at least $62,400 per year in order to qualify for the exemption status.
Employers will also face additional costs associated with overtime, employment taxes, worker compensation, and social securtiy contributions as the minimum wage increases take effect.