Governor Brown Signs Bill Increasing California Minimum Wage

September 26, 2013

 

On September 25, 2013, Governor Edmund G. Brown Jr. signed Assembly Bill No. 101, approving a two step increase in California’s minimum wage. The bill amends California Labor Code § 1182.12, and will raise the minimum wage from $8/hour to $9/hour effective July 1, 2014, and then to $10/hour effective January 1, 2016. Note that some cities in California have ordinances that already provide for minimum wage rates at or above these levels—such as San Francisco (currently $10.24/hour) and San Jose (currently $10/hour).2

In addition to creating a higher floor for the compensation of hourly (i.e., non-exempt) workers, the increase in the state minimum wage also has important ramifications for the compensation of salaried (i.e., exempt) workers.

In order to qualify for exempt status in California under the administrative, executive, or professional exemptions, an employee must satisfy both a duties test and a salary test. The latter requires that the employee earn a salary of no less than twice the minimum wage for forty (40) hours of work. Accordingly, the increase in the state minimum wage will also raise the minimum salary necessary to pass the salary test. Pursuant to the formula used by the California Division of Labor Standards Enforcement3, the new minimum salaries may be calculated as follows:

  • Effective July 1, 2014: $720 per week / $3,120 per month / $37,440 per year
  • Effective January 1, 2016: $800 per week / $3,466.67 per month / $41,600 per year

There are, however, other considerations when adjusting and/or determining an exempt employee’s minimum salary. Before making any such adjustments, you should consult with an attorney knowledgeable in California wage and hour law.

[1] The bill can be found here.
[2] Both San Francisco’s and San Jose’s ordinances also contain provisions for automatic future increases based on the Consumer Price Index for urban wage earners and clerical workers (“CPI”). Increases under San Francisco’s ordinance are tied to the San Francisco-Oakland-San Jose CA metropolitan statistical area CPI, whereas increases under San Jose’s ordinance are tied to the U.S. City average CPI.
[3] California Division of Labor Standards Enforcement, Enforcement Policies and Interpretations Manual § 51.6.5.2. See also Combs v. Skyriver Communications, Inc., 159 Cal. App. 4th 1242, 1251 (2008).

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