It is important to note that the minimum wage increase not only affects the hourly pay due to minimum wage employees, but may also impact the compensation level of those “salaried” exempt employees. In order for an employee to be classified as “exempt” under the Executive, Administrative, or Professional Exemption, the employee must earn a monthly salary of at least two times the minimum wage (and must meet certain “duties” test).
Currently the minimum annual salary for an exempt employee must be at least $33,280.00. Once the minimum wage increases, the minimum salary required to maintain exempt status will rise to an annual salary of $37,440.00. After the second increase, on January 1, 2016, the minimum annual salary will rise to $41,600.00.
In addition, to the basic wage increase issues, several other aspects of wage and hour compliance are impacted by this minimum wage increase:
• Meal Credit Increase: Under the new minimum wage standard, the new maximum credit amounts for meals has increased to:
• $3.26 Breakfast
• $4.47 Lunch
• $6.01 Dinner
• Lodging Credit Increase: The Lodging Credits have also increased to:
• $42.33 per week/ Room occupied alone
• $34.94 per week/Shared room
• $508.38 per month/Apt
• $752.02 per month/Apt for couple
This information can be found in the IWC’s California Minimum Wage Notice (MW-2014) available at: www.dir.ca.gov/iwc/MW-2014.pdf .
• Inside Sales Overtime Exemption: To be exempt from an overtime compensation entitlement, an inside salesperson must earn one and one-half times the minimum wage for each hour worked during the payroll period. This amount will increase from $12.00 to $13.50 on July 1, 2014, and to $15.00 on January 1, 2016.
• Overtime Exemption for Those Who Use their Own Tools: An employee who is paid at least 2x minimum wage may be required to provide and maintain his or her own hand tools and equipment customarily required by the trade or craft. This amount will rise to $18.00 per hour on July 1, 2014, and to $20.00 per hour on January 1, 2016.
All 17 of the Industrial Welfare Commission (IWC) Wage Orders, published by the California Department of Industrial Relations (DIR) have been updated to reflect the increased minimum wage. The revised Wage Orders also reflect the updated meal and lodging credit amounts. These Wage Orders must be posted in each location. You must post the one that is specific to your industry. The industry specific Wage Orders can be found and downloaded at: www.dir.ca.gov/iwc/wageorderindustries
In addition, be certain that you are complying with California’s Wage Theft Protection Act which requires all employers provide to non-exempt employees a written notice of certain information about their jobs, including their wage rate. The State of California has created a Wage Theft Protection Act Notice which sets forth the information needed to be provided to all new hires. You can download the form at www.dir.ca.gov/iwc/wageorderindustries or contact our firm for a copy.
Although employers are not required to re-issue the Wage Theft Protection Act notice to current employees employers should still consider providing a new Notice. If non-exempt employees do not already have a signed Notice on file, now is an opportune time to provide one.
What Should I do:
• Increase those earning $8.00 an hour to $9.00 per hour.
• Review exempt employee compensation to determine if their annual salary meets the new base minimum salary requirements. If not, the employee must receive a wage increase or must be re-classified as non-exempt and paid on an hourly basis.
• Post the new Wage Orders & the California Minimum Wage Notice (MW-2014).
• Conduct a wage audit and ensure that employees are being properly paid, and that each employee has been provided a Wage Theft Protection Act notice.