MINIMUM WAGE INCREASE TO TAKE EFFECT JANUARY 1ST

On January 1, 2022, the California state minimum wage increased and is set to increase again next year as follows:

CALIFORNIA MINIMUM WAGE RATE

Effective Date	Employers With 26 or More Employees	Employers With 25 or Fewer Employees
1/1/2022	$15/hour	$14/hour
1/1/2023	$15/hour	$15/hour

Employers should review their non-exempt employee wage rates and make appropriate adjustments to ensure compliance for 2022 increases.

EXEMPT SALARY INCREASE TIED TO MINIMUM WAGE INCREASE

The increase in the state’s minimum wage impacts the compensation paid to exempt executive, administrative, and professional employees to maintain their exempt status. For an employee to be exempt from overtime they must meet the duties test and the salary test.

The “duties test” requires that the employee perform exempt duties more than 50 percent of their work time.

The “salary test” requires that the exempt earn a salary of no less than two times the state minimum wage for full-time employment.
The annual salary threshold is based on the current state minimum wage, calculated as follows: (Minimum wage rate x 2) x 2,080 hours (standardized 40 hour workweek).

Employers with 1-25 employees:	$58,240 per year
Employers with 26 or more employees:	$62,400 per year
Computer professionals:	$8,679.16 per mo; $104,149.81 per year
Licensed physicians and surgeons:	$91.07 per hour

Employers should review the compensation rates for their exempt employees to ensure that the meet the minimum threshold salary level.If the employee does not meet the salary test, the employee must be classified as non-exempt and are eligible for overtime.

Click here for overtime rates and salary thresholds chart.

LOCAL MINIMUM WAGES

Some local jurisdictions have their own minimum wage ordinances which provide for a higher minimum wage than the State. For some of these local jurisdictions the next phase of the minimum wage increase took effect on January 1, 2022; others do not take effect until July 1, 2022.Employers must comply with the local minimum wage rate if the local rate exceeds the state minimum wage rate. Click here for a chart showing some of the local minimum wage rates and effective dates.Also many of the local jurisdictions base their wage rate on the employer size; other jurisdictions do not have the distinction in minimum wage based on employer size.

Determining the number of employees

The Labor Commissioner has provided some answers to assist employers in determining the number of employees the business has to determine which wage rate applies; however, this approach may not be accepted for a civil claim filed in court.Generally, the Labor Commissioner has stated that any individual working for compensation should be counted as an employee for purposes of determining which wage rate applies, regardless of the number of hours worked or the geographic location. This includes part-time workers, new hires, and exempt employees.Surprisingly (or not), the Labor Commissioner has stated that workers obtained through a staffing agency should be counted along with other direct hire workers as employees for purposes of determining the applicable minimum wage rates. Workers who are not counted include bona fide independent contractors.

Time Period Used to Determine Employee Count

The Labor Commissioner has also stated that a court, or the Labor Commissioner, will likely look at the facts during the pay period in which an alleged underpayment occurred.For example, If an employer reaches the threshold of 26 employees at any point in a pay period, the employer should compensate workers at the higher minimum wage rate for the duration of the entire period.If the number of employees fluctuates throughout the year, the Labor Commissioner offers the following guidance:

If your workforce increases to 26 or more employees at any time during a pay period, you should apply the large-employer rate to all employees for that pay period.

If your workforce drops below 26 employees and you decide to lower the wage, the Labor Commissioner states that you must give advance notice and wait until the following pay period before reducing wages, and you must provide the information on the pay stub. For advance notice, the Labor Commissioner specifically refers to the Wage and Employment Notice to Employees (Labor Code section 2810.5).

This Newsletter is intended as a brief summary of employment law. While every effort has been made to ensure the accuracy of the information contained herein, it is not intended to serve as “legal advice,” or to establish an attorney-client relationship. If additional information is needed on any of the topics contained herein, please contact our office. All rights reserved. ©2022.