California Minimum Wage

Seyfarth Synopsis: Effective January 1, 2019, California’s minimum hourly wage goes up to $12.00 for large employers, and many local minimum wages will go higher still. Don’t forget that the statewide change will affect salary thresholds for white collar exemptions, as well.

Effective January 1, as New Year’s bells toll, California’s minimum hourly wage will increase to $12.00 for employers of 26 or more, and $11.00 for employers of 25 or fewer.

This latest statewide adjustment is part of a series of adjustments mandated by a 2016 statute that, by 2020, will raise the statewide minimum wage to $15.00. The latest adjustment obviously increases what employers must pay for regular and overtime wages for employees currently earning the minimum. And the new, higher minimum wage also will automatically increase the threshold salary employers must pay to maintain salary-exempt status for administrative, executive, and professional employees: the threshold salary is twice the state minimum wage for a 40-hour week. The new annual salary minimum for large employers as of 2019 will thus rise to $49,920 (2 times $12/hour times 40 hours/week times 52 weeks/year).

In addition, to maintain overtime-exempt status for commissioned salespeople (in retail and service establishments, with the earnings threshold calculated as exceeding 1.5 times the current minimum wage), employers must now pay a higher earnings threshold—$18.01 per hour—and over one-half of the earnings 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.

On top of the statewide change, the following California cities will be sending their own New Year’s greetings for minimum-wage earners:

Belmont: Employers who are subject to the Belmont Business License Tax or who maintain a facility in Belmont must pay—to each employee who performs at least two hours of work per week in Belmont—a minimum wage of $13.50. This requirement applies to both adult and minor employees.

Cupertino: Employers who are subject to the Cupertino Business License Tax or who maintain a facility in Cupertino must pay—to each employee who performs at least two hours of work per week in Cupertino—a minimum wage of $15.00. Covered employees are entitled to these rights regardless of immigration status.

El Cerrito: An employee who performs at least two hours of work in a particular workweek within the geographic limits of the City of El Cerrito must be paid a minimum wage of $15.00. This minimum wage applies regardless of the size of the employer, and applies to both part-time and full-time employees.

Los Altos: Employers who are subject to the Los Altos Business License Tax or who maintain a facility in Los Altos must pay—to each employee who performs at least two hours of work per week in Los Altos—a minimum wage of $15.00. This requirement applies to both adult and minor employees.

Mountain View: Employers who are subject to the Mountain View Business License Tax or who maintain a facility in Mountain View must pay—to each employee who performs at least two hours of work per week in Mountain View—a minimum wage of $15.65. This requirement applies to both adult and minor employees.

Oakland: Employers in the City of Oakland must pay a minimum wage of $13.80 to employees who perform at least two hours of work in a workweek within the geographic limits of the city. This requirement applies to both part-time and full-time employees.

Palo Alto: Employers in Palo Alto must pay a  minimum wage of $15.00 to any employee who works two hours per week within Palo Alto.

Redwood City: Redwood City’s local minimum wage of $13.50 will apply to all business operating within the geographic boundaries of Redwood City and any employee working at least two hours per week.

Richmond: All employers in the City of Richmond must pay a minimum wage of $15.00 to employees who work at least two hours per week within the geographic boundaries of the city. This requirement applies to both minor and adult employees.

San Diego: Employers must pay all employees who perform at least two hours of work in one workweek within the geographic boundaries of the City of San Diego a minimum wage of $12.00. This requirement applies to both minor and adult employees.

San Jose: Employers who are subject to the San Jose Business License Tax or who maintain a facility in San Jose must pay—to each employee who performs at least two hours of work per week in San Jose—wages of not less than $15.00 per hour. This requirement applies to both minor and adult employees.

San Mateo: Employers who are subject to the City of San Mateo Business License Tax or who maintain a facility in the city must pay a minimum wage of $15.00. Tax-exempt nonprofit organizations must pay a minimum wage of $13.50. This requirement applies to adult and minor employees.

Santa Clara: Employers who are subject to the Santa Clara Business License Tax or who maintain a facility in Santa Clara must pay—to each employee who performs at least two hours of work per week in Santa Clara—a minimum wage of $15.00 per hour. This requirement applies to both minor and adult employees.

Sunnyvale: Employers who are subject to the Sunnyvale Business License Tax or who maintain a facility in Sunnyvale must pay—to each employee who performs at least two hours of work per week in Sunnyvale—a minimum wage of $15.65. This requirement applies to both adult and minor employees.

Below is a handy “at a glance” chart detailing these municipal increases.

City Minimum Hourly Wage Effective January 1, 2019
Belmont $13.50
Cupertino $15.00
El Cerrito $15.00
Los Altos $15.00
Mountain View $15.65
Oakland $13.80
Palo Alto $15.00
Redwood City $13.50
Richmond $15.00
San Diego $12.00
San Jose $15.00
San Mateo $15.00
Santa Clara $15.00
Sunnyvale $15.65

Finally, still more cities (including Los Angeles and San Francisco) will impose higher minimum-wage requirements next July 1. Be sure to check this space in mid-2019 for those updates.

Non-California employers with non-exempt workers who work in California will be interested in the following piece, originally posted on Seyfarth’s Wage Hour Litigation Blog.

Seyfarth Summary: On July 12, 2018, the California Supreme Court agreed to address questions posed by the Ninth Circuit about whether California Labor Code provisions apply to an out-of-state employer whose employees work part of their time in California. Nationwide employers with employees jetting in to work temporarily in California need to return their seats to an upright position and follow this developing story.

Is your business flying high in the current economy? Profits reaching new altitudes? Maybe you have employees residing in one state while working in another. If some work occasionally in California, prepare to fasten your seatbelts for a potentially rough landing. Even if your employees work in California only intermittently (think partial days), and even if your company is not headquartered in the Golden State, the California Supreme Court may soon bring you down to earth.

Background

Traditionally, employers in paying their employees have applied the wage and hour law of the state where the employee sides or most often works, even if the employee occasionally works in another state. In California, however, the rules are peculiar.

In a 2011 decision, Sullivan v. Oracle, the California Supreme Court held that non-California residents working in California for a California-based employer were subject to California daily overtime laws if they performed their in-state work for whole days. Oracle left employers up in the air as to whether California law would apply in other contexts, such as (a) when non-California residents work partial days of work in California, (b) when the employees worked for non-California based employers, or (c) when the wage and hour provisions at issue were something other than the cal-peculiar rules on daily overtime.

The Certified Questions

Which brings us to the current Ninth Circuit cases. Specifically, in three airline cases raising California issues in federal court (two cases against United Airlines, one against Delta), the Ninth Circuit requested the California Supreme Court to address five questions, paraphrased below:

(1) Does the federal Railway Labor Act exemption found in Wage Order 9 bar a wage-statement claim (Labor Code § 226) by an employee who is covered by a collective bargaining agreement?

(2) Does Section 226 apply to wage statements that an out-of-state employer provides to an employee who resides in California, who receives pay in California, and who pays California income tax on her wages, but who does not work principally in California?

(3) Does Section 226 and Labor Code § 204 (governing timely wage payments to current employees) apply to payments that an out-of-state employer makes to an employee who, in the relevant period, works in California only episodically and for less than a day at a time?

(4) Does California minimum wage law apply to out-of-state employers for the California work that their employees perform in California only episodically and for less than a day at a time?

(5) Does California’s peculiar rule preventing pay-averaging for employees paid by commission or piece rate apply to a pay formula that generally awards credit for all hours on duty, but that does not always award pay credit for all hours on duty?

In the underlying lawsuits, United pilots and Delta flight attendants claim that the airlines violated California Labor Code provisions on wage statements, minimum wage, and the timing and completeness of wage payments. United (based in Chicago) and Delta (based in Atlanta) both won at the district court level, successfully arguing that de minimis work within California does not trigger California law, especially when (i) the employers are not based in California, (ii) the employees work only limited amounts of time in the state, and (iii) the employees mostly work in federal air space and in multiple jurisdictions during a single pay period or even a single day.

Why Does This Matter to Employers Based Outside California?

The guidance that the California Supreme Court will issue may ensnare non-California employers in a complex web of Labor Code laws for employees who work in California only sporadically, or who merely stop in California on their way to other work locations. It remains to be seen whether the Supreme Court will stretch to apply California’s peculiar rules on wage statements, daily overtime, and minimum wage to such transitory California work. Or whether California rules on meal and rest beaks, or paid sick time, might also be implicated.

Based on recent emanations from our high court, we would not be surprised to see another extension of California’s employee-protective laws. Any such extension would be highly problematic in light of California’s robust civil and statutory penalties for Labor Code violations. The state’s Private Attorneys General Act authorizes penalty lawsuits brought on a representative basis on behalf of all “aggrieved employees or former employees.” While we do not predict that California will attempt to regulate employment of individuals who merely fly through California airspace, all employers with employees having feet on the ground in California need to sit up, return their tray tables to their original position, and be alert to these pending decisions.

Workplace Solution: The California Supreme Court’s opinion regarding the certified questions will not come down for many months. In the meanwhile, sit back, enjoy the flight, and watch this space for further developments. Feel free to contact your favorite Seyfarth attorney if you would like to discuss.

Seyfarth Synopsis:  Changes to the FLSA regulations increasing the minimum weekly salary for exempt employees will impact California employees who currently are being paid less than $47,476 per year. Wise employers will start planning now to make the adjustments required to ensure compliance with both state and federal exemption laws. 

If you have white-collar exempt employees in California, you know that to qualify as an exempt executive, administrative or professional employee, an employee must (among other things) be paid by a salary that is at least twice the state minimum wage. With the California minimum wage currently set at $10 per hour (at least until next January, when it will increase to $10.50/hour), a little math tells us that the California salary threshold for white-collar exempt employees is $41,600/year [40 hours per week x $10.00 = $400/week x 52 weeks = $20,800; times 2 = $41,600].

If you have been catching the national news on the Department of Labor’s recent amendments to the FLSA regulations, you know that the federal salary threshold for white-collar exemptions is going up dramatically—to $913 per week, or $47,476/year.

The federal changes will go into effect on December 1, 2016. There are a number of options for responding to the new regulations, ranging from simply raising salaries to the federally-required level to re-classifying positions to non-exempt. You can access tons of relevant, helpful and interesting information here at Seyfarth’s FLSA Exemption Resource Center.

Until now, we in the Golden State did not often worry about the federal salary minimum for exemptions, because it was so much lower than what was required here. Now, however, we must take note—and make adjustments—for any employees who are currently classified as exempt and who are not being paid at least the equivalent of $47,476 per year.

What types of employees are we talking about? Employees who are likely to fall into this category in California include the ranks of a company’s exempt staff currently being compensated at or close to the current state minimum allowable salary; in other words, those being paid at or above $41,600, but less than $47,476. Examples might include some managers, executive assistants, human resources professionals, business development or marketing professionals, teachers, accountants, engineers, and creative professionals.

Even though the FLSA amendments will not go into effect until December 1, one question has already surfaced as a Cal-Peculiarity:  what to do with part-time exempt employees? It was, and remains, permissible (if perhaps uncommon) to have exempt employees who work part-time schedules, as long as they are paid at least the salary minimum (federal and CA) for each week of work, as the federal regulations do not allow pro-ration of weekly salary. As of December 1, 2016, any part-time exempt employees will have to be paid at least $913 per week.

If paying the higher weekly amount to part-time exempt folks is not a good option for the employer, a solution (in theory) under federal law would be to convert the employee to salaried non-exempt, and pay the employee for any overtime incurred according to the fluctuating workweek method (a method of calculating the regular rate of pay that varies according to the number of hours worked in a particular week). Not so fast. This method is not permitted in California, and converting California part-time exempt to salaried non-exempt employees could have expensive, unintended consequences if overtime were incurred. So, that solution may not be your best bet under California law.

Employers in California, as elsewhere, still have time to consider their workforces and make and implement plans for any necessary adjustments to their current exempt positions. But, we recommend that you begin your review and planning now.

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.