California Minimum Wage Increases to $9
June 16, 2014
On July 1, 2014, the minimum wage for California employees will rise from $8.00 to $9.00 per hour. Although the $1.00 increase is straightforward, employers must pay careful attention to the effects that the increase will have on other employment practices related to the minimum wage. Notably, employers should be mindful of the following:
1. Overtime, Vacation, Sick Leave, Paid Time Off, Meal and Rest Period Premiums: As a result of the increase to the state minimum wage, California employers need to adjust certain wage premiums, including, overtime, vacation, sick leave, paid time off, and meal and rest period premiums.
2. Exempt Employees: Generally, exempt employees must earn a minimum monthly salary of no less than two times the state minimum wage for full-time employment. As of July 1, employers will have to pay exempt employees an annual salary of at least $37,440.
3. Sales Commission Exemption: An employee whose earnings exceed one and one-half times the minimum wage and for whom more than half of the compensation is comprised of commissions may be exempt from overtime provisions under certain Wage Orders. Beginning July 1, 2014, such employees will need to earn at least $13.51 per hour to qualify for this exemption.
4. Trade Equipment or Tools: Generally, an employer must provide and maintain trade tools or equipment it requires or which is necessary for the performance of an employee’s job. Any employee who is paid at least twice the minimum wage, however, may be required to provide and maintain hand tools and equipment customarily required by his or her trade. Consequently, employers who require employees to provide their own tools must ensure such employees are paid at least $18.00 per hour.
5. Voluntary Meal or Lodging Agreement: Certain employers may have voluntary written agreements with employees for crediting meals or lodging against wages. California employers will need to adjust any voluntary written agreements to reflect the minimum wage increase.
6. Split-Shift Premiums: Some California Wage Orders require California employers to pay a premium of one hour’s pay at the minimum wage rate to an employee who works a split-shift in a workday. Starting July 1, 2014, California employers will need to adjust any premiums to reflect the minimum wage increase.
These are only a few employment practices the minimum wage increase may affect. Employers should conduct an in-depth review of their employment practices to ensure compliance with the law. The minimum wage rate will increase again to $10.00 an hour on January 1, 2016, requiring that employers once again engage in such a review.