As previously reported here one of the pieces of 2013 California legislation that made a big splash is Assembly Bill 10 (AB 10).  AB 10 amends Labor Code § 1182.12 and raises California’s minimum wage in two steps over 18 months, from $8.00 to $9.00 per hour (on July 1, 2014) and then to $10.00 per hour (on January 1, 2016). 

The increase in minimum wage will obviously increase the amount that employers will need to pay for hourly wages, including the regular rate for overtime.  But, we ask, what other ripple effects will this new legislation create for California employers?  Here are some . . .

Minimum salary under the  “white collar” exemptions

The minimum salary for employees who qualify for one of the “white collar” overtime exemptions (administrative, executive, or professional) must be equivalent to no less than two times the state minimum wage for full-time employment.  Thus, an increase in the minimum hourly wage will, in turn, increase minimum salary requirements for these exemptions.  Beginning on July 1, 2014, the minimum annual qualifying salary will be $37,440, and on January 1, 2016 it will rise to $41,600.  

Minimum wage for the inside salesperson exemption

The inside salesperson exemption (generally available only to retail and service establishments) requires that employees under the exemption earn more than 1.5 times the current minimum wage and that commissions make up more than half of the employee’s earnings, measured on a workweek basis.  Thus, to be exempt from overtime, as of July 1, 2014, California inside salespersons will need to be paid at least $13.51 per hour, and at least $15.01 starting on January 1, 2016.  And, inside salespeople will need to increase their earnings from commissions to continue to qualify under the overtime exemption.

Compensation for non-productive work by commissioned or piece-rate employees

The increase in minimum wage also affects employers who compensate their employees on a commission only or piece-rate basis.  Recent judicial decisions mandate that such employees be compensated at no less than the minimum wage for non-productive work performed by such employees.  Click here to see our prior post on this issue. 

Adjusting compensation for employees receiving meal and lodging credits

Wage orders in virtually every industry or occupation allow the value of meals and lodging furnished by the employer to be credited toward the employer’s minimum wage obligation up to specific amounts.  Employers who use this form of compensation as part of their wage obligations will need to adjust accordingly to ensure that they are meeting the increased minimum wage obligations.

Changes must be reflected in itemized wage statements

The Labor Code requires employers to provide every employee with a written itemized statement either semimonthly or at the time wages are paid.  (Labor Code § 226).  Among other things, the itemized statement must show all applicable hourly rates in effect during the particular pay period and the corresponding number of hours worked at each hourly rate.  Employers should take steps to make sure that their itemized statements (as well as all other internal payroll-related documents) accurately reflect the increased minimum wage when the changes take effect.

Notifying employees of changes in accordance with the Wage Theft Prevention Act

The “Wage Theft Prevention Act of 2011” (see Labor Code § 2810.5) took effect on January 1, 2012.  Among other things, it requires employers to notify non-exempt employees in writing of any changes to their rate of pay.  Notice of any changes must be provided within seven calendar days from the time the change was made.  Accordingly, employees affected by the change in minimum wage must receive notice from their employer by July 7, 2014, for the increase to $9.00, and by January 7, 2016, for the increase to $10.00.