Beginning on January 1, 2016, California's minimum wage increased from $9.00 to $10.00 per hour.
Whenever the baseline minimum wage is increased, however, it is also important to remember that it creates a "ripple effect" on various minimum compensation thresholds pegged to the minimum hourly rate. These include:
- The minimum salary for exempt executive, professional, and administrative employees. To remain exempt from overtime, such "white collar" employees must be paid a salary equal to twice the minimum wage based on a 40-hour work week. As of January 1, this minimum exempt salary level therefore increased from $720 to $800 per week.
- The minimum weekly compensation for exempt inside "commissioned sales" employees. To remain exempt from overtime, an employee who regularly earns over half his income in commissions must also be paid no less than 1.5 times the minimum wage in each exempt pay period. As of January 1, this minimum threshold (assuming a 40 hour workweek), therefore increased from $540 to $600 per week.
- The minimum hourly rate for exempt employees covered by a CBA. To remain exempt from statutory overtime, an employee covered by a CBA which contains its own alternative overtime premium provision must be guaranteed a minimum regular rate of pay that is at least 30% over the statutory minimum. As of January 1, this minimum hourly wage due under a CBA therefore increased from $11.70 to $13.00 per hour.
These compensation thresholds are bright-line rules. The employer either pays the minimum, or it doesn't. And there is no "close enough" or "excusable negligence" defense. Thus, an employer who fail to maintain these minimum thresholds will be unable to claim the exemption and will be liable for all overtime hours worked by the under-compensated employees.