The Los Angeles City Council, in a 14-to-1 vote, this week raised the minimum wage from $9.00 per hour to $15.00 per hour by 2020. 

Although this increase only applies to the City of Los Angeles, as was the case when San Francisco raised its minimum wage, we expect local jurisdictions in the vicinity will do the same.  The city attorney will draft the language of the new law for the Council’s final approval, which will go into effect on July 1, 2016.    

The Los Angeles increase will be phased in over five years:

  • $10.50 per hour effective July 2016
  • $12.00 per hour in 2017
  • $13.25 per hour in 2018
  • $14.25 per hour in 2019  
  • $15.00 per hour in 2020 

Starting in 2022, annual minimum wage increases will be based on the Consumer Price Index.     

This follows recent increases to the local minimum wage in Seattle and Chicago and recent changes to the state minimum wage in California.  In 2013, California raised 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.  We anticipate that this is the beginning of a series of similar laws to be enacted throughout the country

Here are six action steps for Los Angeles employers:

  1. Make any necessary changes to payroll in order to meet the new requirements as they become effective.
  2. Ensure minimum wage is paid for each and every straight time hour worked.
  3. Remember to adjust overtime and meal period penalty rates accordingly.
  4. Evaluate that the new salary basis test is applied to existing and new exempt employees.
  5. Confirm wage statements are accurate.
  6. Reassess inside sales compensation for compliance with exemption requirements.

Wage hikes will pose a challenge operationally for many businesses. Businesses need to be mindful that they have in place compliant policies and practices that address the following:

  • Scheduling personnel in a strategic manner to manage overtime costs.
    • For example, scheduling employees for 6 hours instead of 8 in a day, and making decisions on staffing at the 7 hour mark instead of 8, goes a long way towards managing potential overtime costs. 
  • Effective scheduling, through modeling of customer needs and business demands, can reduce the need for potential layoffs.
  • Training supervisors to properly oversee implementation and properly convey messages to employees at the store level.