The next phase of the minimum wage increase for many jurisdictions will take effect on July 1, 2021. If your business is located in, or if your employees perform work in, certain jurisdictions you must comply with the “local” minimum wage for your city or county if the local ordinance provides for a minimum wage higher than the State of California.

The attached chart shows some of the local minimum wage rates and effective dates.

LOCAL MINIMUM WAGE ORDINANCES

Previously, in some jurisdiction, such as Pasadena, Los Angeles County and City, Santa Monica and Malibu, the local minimum wage increase was dependent on the number of employees – specifically employers with 25 or fewer or employers 26 or more employees. In some jurisdictions, the smaller employer minimum wage has caught up with the larger employer minimum wage.

Determining the number of employees

This is not always so simple. The Labor Commissioner has provided some answers to assist in determining the number of employees your business has; however, this is not binding for a claim brought before the court (but remains helpful guidance).

Generally, 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 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).
CALIFORNIA MINIMUM WAGE, SALARY THRESHOLD & OVERTIME

California’s Minimum Wage increase takes effect of January 1st of each year.

It is important to remember that to be classified as an exempt employee, the worker must meet the: (a) salary test and (b) the duties test. For an employee to meet the “salary test” for the exemption from overtime to apply the employee must be paid a monthly salary of no less than two times the state’s minimum wage for full-time employment.(NOTE: The local minimum wage increase does not impact the salary test for exempt classification.)

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.

Below are the next minimum wage incremental increases.

  Dates  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
MINIMUM WAGE POSTER REQUIREMENTS
The City and County of Los Angeles and City of Santa Monica have published their own Minimum Wage Posters which must be displayed in the workplace. Employers should check with their cities and counties for the current minimum wage poster to be displayed.
Click on the links below for the current posters.

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. ©2021.

Skip to content