California’s statewide minimum wage increase and what it means for employers

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Despite opposition from the Chamber of Commerce, Governor Jerry Brown has signed into law a bill raising California’s minimum wage for the first time since 2008.

AB 10 amends the California Labor Code, raising the state’s minimum wage in two separate one-dollar increments: from $8.00 per hour to $9.00 per hour, effective July 1, 2014, and then from $9.00 per hour to $10.00 per hour, effective January 1, 2016. The new law does not currently provide for any annual inflation-adjusted increases.

Several municipalities in California have already set minimum wage rates which exceed state and federal thresholds and apply to all employees doing work within the geographic boundaries of that locality. For instance, an employee who works in San Francisco must be paid at least $10.55 per hour, while San Jose’s minimum wage rate is $10.00 per hour.  Similarly, airport employees working at LAX must be paid at least $10.91 per hour with health benefits of at least $4.76 per hour, or $15.67 per hour without health benefits.

Employers should make any necessary changes to payroll in order to meet the new requirements as they become effective. Additionally, employers will be required to conspicuously post the new wage notices and forms in an area frequented by employees where it may be easily read during the workday.

California law requires that employees be paid the minimum hourly wage for each and every hour worked, whether the employee is paid by the hour or on an alternative basis. Therefore, the new rates should also be kept in mind since employers can no longer satisfy minimum wage requirements by averaging compensation over the entire pay period after a claim has been brought.

Eighteen states now have a minimum wage above the federal requirement of $7.25 an hour. Washington state currently has the highest minimum wage of $9.19 per hour, followed by Oregon at $8.95 per hour, set to increase to $9.10 per hour on January 1, 2014.  When state and federal law differ, employers must comply with the more restrictive requirement.

Our team has extensive experience counseling and representing California employers in wage and hour law, and is happy to answer any questions you may have in preparing for the new minimum wage rates and how the new law might otherwise affect your pay practices.

Published In: Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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