California Minimum Wage Increase has Ripple Effect on Other Laws

Under recently signed legislation (AB 10) the minimum wage in California will increase on July 1, 2014 from $8.00 to $9.00 per hour; and will increase again on January 1, 2016 to $10.00 per hour.

The unusual mid-year implementation of the 2014 increase may catch some businesses by surprise, so employers should mark their calendars and make plans to implement the change. Also, anytime the base minimum wage increases it necessarily has a ripple-effect on other compensation thresholds.  For example:

  • The minimum salary necessary to avoid overtime payments to exempt "white collar" managerial, administrative and professional employees is pegged at twice the minimum wage rate for a 40-hour workweek.  This weekly salary threshold will thus rise to $720 on July 1, 2014, and $800 on January 1, 2016.
  • The "regular rate of pay" for exempt commissioned salespeople is pegged at 1.5 times the minimum wage and will thus increase in 2014 and 2016 to $13.50 and $15.00, respectively. 
  • Unlike federal law, California's minimum wage rate must be separately paid for "each hour worked" rather than as the average of the compensation for all hours worked in a week.  As a result, "piece rate" or performance-based compensation systems must ensure that each category of employee work time is generating sufficient compensation to comply with the new standards.

Under the new rates, California's minimum wage rates will be the highest in the nation.   But stay posted, a high-profile movement is under way to push for a base minimum wage rate of $15.00. 

 

   

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