If the California state minimum wage changes, are you ready? Employers may need to review the salaries of certain exempt employees to ensure compliance with the minimum salary basis test under the Executive, Administrative, and Professional overtime exemptions. On September 16, 2013, AB 10, the California state minimum wage increase legislation, was enrolled meaning it has passed both the California Senate and Assembly and is ready for signature by Governor Jerry Brown. AB 10 could soon amend Section 1182.12 of the California Labor Code to read:

“Notwithstanding any other provision of this part, on and after July 1, 2014, the minimum wage for all industries shall be not less than nine dollars ($9) per hour, and on and after January 1, 2016, the minimum wage for all industries shall be not less than ten dollars ($10) per hour."

In addition to possible implications for employers with collective bargaining agreements, all private employers with exempt employees in California must determine whether they will remain in compliance. For employees to be properly classified as exempt under the Executive, Administrative, and Professional Exemptions of most of the California Wage Orders, the employee must earn a monthly salary equivalent to no less than two (2) times the state minimum wage for full-time employment (40 hours per week). If this legislation is signed, the minimum salary test for the Executive, Administrative, and Professional Exemptions would increase from $33,280 to $37,440 annually. Employers should review whether their exempt employees will still meet the salary requirement by July 1, 2014 and again by January 1, 2016 if the bill is signed. Keep watch on whether the Governor will sign it this week or next.