Hunton Employment & Labor Perspectives

Effective January 1, 2019, California’s minimum wage increased from $11.00 to $12.00 per hour. This increase applies to all employers who employ 26 or more employees (“large employers”).  For employers with 25 or fewer employees (“small employers”), the minimum wage increased from $10.50 to $11.00 per hour. (In fact, all employers ultimately will pay a statewide minimum wage of $15.00 per hour, although the timing of the increase depends on the employer’s size: for large employers, California’s minimum wage will increase by $1.00 on a yearly basis through January 1, 2022, and for small employers, California’s minimum wage will increase by $1.00 on a yearly basis through January 1, 2023. Cal. Lab. Code § 1182.12).

Consequently, this increase affects that the minimum salary for exempt employees:

• Exempt employees (those who qualify under the professional, executive, or administrative exemptions) must receive a monthly salary equivalent to at least twice the state minimum wage for full-time employment. Lab. Code § 515(a).  Accordingly, the minimum salary for these employees must be at least $49,920 per year (or $45,760 for small employers).
• Commissioned employees who qualify for the inside sales exemption must receive at least one-and-a-half times the state minimum wage per pay period to continue to qualify as exempt from overtime pay. Code Regs., tit. 8, §§ 11040(3)(D), 11070(3)(D). Thus, these employees must earn at least $18.00 per hour to maintain their exempt status (or $16.50 for small employers).
• Employees who qualify under the computer software exemption must receive a minimum salary of at least $45.41 per hour. Cal. Lab. Code § 515.5.
• Employees who qualify under the licensed physician and surgeon exemption must receive a minimum salary of at least $82.72 per hour. Cal. Lab. Code § 515.6.

In addition to the statewide minimum wage, several cities and counties have adopted their own minimum wage requirements.  The chart below indicates the changes to local minimum wage rates throughout California, effective January 1, 2019.  The local minimum wage applies to employees who perform at least two hours of work per week in the respective county or city.

With the minimum wage increase (and continued increases), employers should re-examine employee compensation and ensure that they are meeting the minimum wage requirements for all employees.