Today, Governor Jerry Brown signed AB 10, raising California’s minimum wage to $9.00 an hour, effective July 1, 2014, and to $10.00 an hour, effective January 1, 2016. This 25% increase by 2016 is the first minimum wage increase in California in five years. The bill was authored by Assemblyman Luis Alejo (D-Watsonville), and passed both the state Senate and Assembly on Thursday, September 12th.
The new law will affect nearly all employers -- not just those with minimum wage workers. In addition to the new hourly minimum, the new law has several derivative implications.
Perhaps most significant is the bump in salaries to the so-called "white collar exemptions" for managers and other exempt office employees. To qualify for the Executive, Administrative, and Professional exemptions, an employee must be paid on a salary basis at a rate twice the state minimum wage for full-time monthly employment (based on a 40-hour workweek). After July 1, 2014, the minimum monthly salary to qualify for these exemptions is $3,210. After January 1, 2016, the minimum monthly salary is $3,466.67. Therefore, employers should review the salaries paid to all employees classified as exempt under these exemptions to ensure that their employees continue to satisfy these minimum salary requirements, as well as all other elements of the exemptions. (Note: Because the minimum hourly rate for employees covered by the Computer Professional exemption is independently established by California’s Division of Labor Statistics, the minimum wage increase does not affect compensation for employees classified as exempt computer professionals.)
In addition, to qualify for the Commission Sales exemption in Wage Orders 4 and 7, employees must earn one and a half times the minimum wage for all hours worked, or $13.50 per hour after July 1, 2014, and $15.00 per hour after January 1, 2016.
Employers who require employees to provide their own hand tools because their trade or craft customarily requires them to provide tools and equipment must also ensure that all such employees are paid at least twice the state minimum wage for all hours worked ($18.00 per hour after July 1, 2014, and $20.00 per hour after January 1, 2016).
The minimum wage increase also affects the minimum hourly rates that union employees must receive to qualify for the state overtime exemptions, the split-shift premium rate, the meal and lodging credits, the uniform maintenance allowance, and the minimum rates that must be paid employees of organized camps.
Employers have until the July 1, 2014 effective date to assess the pay rates for their hourly and salaried workers and change rates or reclassify where needed to comply with the law. Additional employees may be affected when the second step increase takes effect on January 1, 2016.