On April 4, 2016, Governor Jerry Brown signed SB 3, increasing the statewide minimum wage to $15.00 per hour. The increase will be phased in over the next six years.

First introduced in the state Senate by Senator Leno on December 1, 2014, SB 3, was subject to contentious debate on both the Assembly and Senate Floors on March 31st. Those interested in watching legislators argue for and against the wage hike can watch the Assembly debate here and the Senate debate here.

SB 3, which amends Section 1182.12 of the Labor Code, increases the minimum wage according to different schedules, depending on the number of employees. Here is the schedule of new minimum wages applying to employers who employ 26 or more employees:

  • January 1, 2017 – $10.50
  • January 1, 2018 – $11.00
  • January 1, 2019 – $12.00
  • January 1, 2020 – $13.00
  • January 1, 2021 – $14.00
  • January 1, 2022 – $15.00

For an employer who employs 25 or fewer employees, each yearly scheduled increase comes one year later, beginning with January 1, 2018 and capping out on January 1, 2023.

After $15.00 has been reached, the Department of Finance will continue to calculate a yearly minimum wage increase at either a rate of 3.5% or the rate of change in the averages of the preceding year’s U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers (U.S. CPI-W), whichever is the lesser amount. The adjusted minimum wage will continue to take effect on the following January 1st. The minimum wage will stay the same if that year’s U.S. CPI-W is negative.

A feature of the new law of particular interest is that the Governor can pause the wage hikes based on economic conditions. The law requires “the Director of Finance to annually determine whether economic conditions can support a scheduled minimum wage increase and certify that determination to the Governor and the Legislature.” The Governor may suspend the scheduled increases a maximum of two times. The Assembly Bill Analysis can be found here and the Senate Bill Analysis here.

We previously reported here  (when the $10 state-wide minimum wage went into effect on January 1, 2016) on the impacts that an increasing minimum wage has on various other compensation determinations, such as the salary threshold for the white collar exemptions under California law. If you have any questions about how forthcoming minimum wage increases will affect your business, please reach out to our California Workplace Solutions team or any member of Seyfarth’s Labor and Employment Group.

Edited by David Kadue and Colleen Regan.