We previously reported here and here on the two-step legislation aimed to increase minimum wage from $8 to $10 by way of two $1 incremental raises. The first $1 increase took effect July 1, 2014. Now it’s time for the second $1 increase, effective January 1, 2016.
That means Happy New Year for some, budget-busting headaches for others.
The obvious employer takeaway from the new minimum wage hike is that now it’s time to pay more:
- Pay more hourly wages. As in 2014, the increase in minimum wage will increase what employers must pay for regular and overtime wages.
- Pay more in salary. To maintain salary-exempt status for administrative, executive, and professional employees, employers must now pay a higher minimum salary (calculated at two times the current minimum wage). The salary minimum will thus increase from $37,440 to $41,600.
- Pay more in commissions. To maintain overtime-exempt status for commissioned salespeople (in retail and service establishments, with the threshold calculated as 1.5 times the current minimum wage), employers must now pay a higher minimum earnings threshold—$15.01 per hour—and over one-half of that amount must consist of commissions, so commissions might have to be increased accordingly.
And, of course, employers, under the Wage Theft Prevention Act, must notify non-exempt employees in writing of any changes to their new rate of pay within seven calendar days from the time of the change (i.e., by January 7, 2016).
While these implications are all readily apparent, the new minimum wage has more subtle implications as well, particularly for employers of unionized employees. Among possibly other implications are these to consider as the new year looms:
- A Sick Pay Impact? California’s new sick pay law, discussed here, here, and here, provides that most employees will earn at least one hour of paid leave for every 30 hours worked. Certain unionized employees covered by a qualifying CBA are exempt from this sick pay requirement, but the hike in minimum wage will raise the qualification bar: CBA-covered employees are exempt only if their regular hourly pay is at least 30 percent more than the minimum wage.
- An Overtime Impact? California employees under a qualifying CBA are exempt from state overtime law. Here, as with the sick pay law, a CBA, to qualify, must provide for regular hourly pay that is at least 30 percent more than the minimum wage.
- A “Non-Productive” Time Piece Rate Calculation Impact? As discussed here, effective January 1, 2016, employers paying employees on a piece-rate basis must pay for “other non-productive time” (when the employee is under the employer’s control but is not engaged in the piece-rate activity). The hourly rate calculation for that time must be no less than the minimum wage, which will increase to $10 on January 1st. Note that this law also applies to unionized employees.
- An Impact On Meal And Lodging Credits? Wage orders in virtually every industry or occupation allow the value of meals and lodging furnished by the employer to be credited toward the employer’s minimum wage obligation up to specific amounts. Employers who use this form of compensation as part of their wage obligations must adjust accordingly to ensure that they are meeting the increased minimum wage obligations.