On July 1, 2022, the minimum wage is set to rise for certain cities and localities in California. It is important for employers to note these changes as they may impact hourly-paid employees. Currently, in California, the minimum wage effective January 1, 2022, is $15.00 per hour for employers with 26 or more employees and $14.00 for employers with 25 or fewer employees. The minimum wage is higher in certain cities and localities.
What Causes Minimum Wage Increases?
Originally, the minimum wage was designed to provide enough income to afford a living wage, the amount needed to provide enough food, clothing, and shelter. However, the purpose has gone unfulfilled in many areas. Many cities and municipalities have passed laws and ordinances to further ensure workers are being paid a livable wage.
Minimum Wage Rates May Differ
Federal, state, and local minimum wage rates may differ. Whichever rate is most favorable to the employee will apply.
Federal Law
The federal minimum wage is $7.25 per hour.
California Law
The minimum wage in California, effective January 1, 2022, is $15.00 per hour for employers with 26 or more employees and $14.00 for employers with 25 or fewer employees.
Local Minimum Wage Laws
Local governments in California, such as cities, may enact their own minimum wage, provided it exceeds the state mandated minimum wage. The following chart summarizes California’s minimum wage rate increases effective July 1, 2022:
|
Locality |
Minimum Wage |
|
Alameda |
$15.75/hour |
|
Berkeley |
$16.99/hour |
|
Emeryville |
$17.68/hour |
|
Fremont |
$16.00/hour |
|
Los Angeles City |
$16.04/hour |
|
Los Angeles County (unincorporated areas) |
$15.96/hour |
|
Malibu |
$15.96/hour |
|
Milpitas |
$16.40/hour |
|
Pasadena |
$16.11/hour |
|
San Francisco |
$16.99/hour |
|
Santa Monica |
$15.96/hour |
|
West Hollywood |
$16.00/hour for 49 or fewer employees; $16.50/hour for 50 or more employees. |
* Other cities may have higher rates than the ones listed. This chart only encompasses cities that have raised their minimum wage, effective July 1, 2022.
In addition to the regular rate of pay, the July 1, 2022, increases will require employers to review various other payments to employees, including:
- Overtime, Vacation, Sick Leave, Paid Time Off, and Meal and Rest Period Premiums: These must be adjusted in light of the minimum wage requirements.
- Voluntary Meal or Lodging Agreement: Meals or lodging may not be credited against the minimum wage of an employee without a voluntary written agreement between the employer and the employee. Any such voluntary agreement must be adjusted to reflect the minimum wage increase.
- Posting Requirement: Employers must post the most current minimum wage rate.
Exempt Employees
Unless a municipality adopts a higher wage requirement for exempt employees – which has not yet happened – the salary requirement for exempt employees is not affected by any local minimum wage ordinance.
Exceptions to minimum wage requirements in California
California wage and hour laws provide for several exceptions to the state minimum wage requirements.
The California minimum wage laws do not apply to:
- Student employees, camp counselors, and program counselors of organized camps, who only need to be paid eighty-five percent (85%) of the minimum wage;
- Participants in national service programs such as AmeriCorps;
- Mentally or physically handicapped employees working for authorized nonprofits and rehabilitation facilities; or
- Outside salespeople. An “outside salesperson” is an employee who spends more than half their working hours away from the employer’s place of business, selling items or obtaining orders.
A Look into the Future of Minimum Wage Laws in California
Governor Gavin Newsom’s advisors have indicated that California’s minimum wage for all employers is projected to rise to $15.50 an hour in January 2023, rather than the expected $15.00 per hour, on January 1, 2023, for all businesses regardless of size. Rising inflation has triggered a provision of a 6-year-old state law governing automatic pay increases. The 2016 wage law signed by then Governor Jerry Brown requires that any inflation growth above 7% over a specified time period triggers an even higher minimum wage.
Beginning on January 1, 2024, and thereafter, the new California minimum wage rate will be calculated annually based on the consumer price index (which measures the aggregate price level in an economy based on commonly purchased goods) of the previous year and, generally, only a few months are given to employers to prepare for the higher wage. The consumer price index is often used by legislators when determining minimum wage rates to maintain the purchasing power of minimum wage workers. Upon this change, it is best practice to consult a professional to ensure compliance with state and local minimum wage laws, as indexed wages can add to the complexity of tracking upcoming minimum wage rates in an area.
This article is not intended to and does not constitute legal advice or a solicitation for the formation of an attorney-client relationship. Anyone with questions about this topic should consult an attorney.
For questions about minimum wage laws or other employment law matters, reach out to our experienced Labor & Employment Department at 408.286.5800 or e-mail susan.bishop@berliner.com.