California Governor Jerry Brown recently signed into law an increase in the state’s minimum wage, from the current rate of $8.00 per hour up to $9.00 per hour beginning on July 1, 2014. The minimum wage will increase again to $10.00 per hour, effective January 1, 2016.
In addition to ensuring that all non-exempt employees are paid the increased minimum wage, employers with operations in California should also evaluate how the increase to the minimum wage affects salaries of exempt employees. California law requires that exempt employees be paid a salary of at least twice the minimum wage for full time employment on a monthly basis. Under the existing minimum wage of $8.00, exempt employees must be paid an annual salary of at least $33,280. With the increase to the minimum wage, the minimum salary for an exempt employee will increase to $37,440 per year by July 2014, and then to $41,600 by January 1, 2016. Employers who do not ensure that their exempt employees are receiving at least these amounts will be exposed to misclassification claims.
Companies with employees in California should review their compensation practices to ensure they are fully in compliance with applicable law before the increased minimum wage takes effect.