As the ink from California Governor Jerry Brown’s pen dries on Assembly Bill No. 10, which will raise the hourly minimum wage in our state to $9.00 effective July 1, 2014 (and again to $10.00 on January 1, 2016), employers need to consider the ramifications of this change beyond the obvious increase in take-home pay of hourly workers.
Here are key areas that will be impacted by the increase:
Salary Basis Test For “White Collar” Exemption – In addition to meeting other criteria to qualify as an exempt employee under one of the “white collar” exemptions (i.e., executive, administrative or professional), exempt employees must earn a salary that is at least twice the minimum wage for full-time employment. This minimum increases in July, 2014 to $37,440, and to $41,600 beginning in January, 2016.
Commissioned Sales Employee Exemption – To qualify for this exemption, employees must earn in excess of 1.5 times the minimum wage for all hours worked. This rate will increase to $13.50/hr on July 1, 2014, and $15.00/hr on January 1, 2016.
Employees Who Furnish Own Tools or Equipment – When employees are required to furnish their own tools or equipment necessary to their performance of the job, they must be paid twice the state minimum wage. This rate will increase to $18.00/hr on July 1, 2014, and $20.00 on January 1, 2016.
Calculation of Overtime, Vacation, Sick Leave, Paid Time Off and Meal and Rest Period Premiums – Employers must adjust how these are calculated to reflect the minimum wage increase.
Employer-Required Split-Shift Premiums – If an employer requires an employee to work a split-shift, the employer must pay the employee a premium, of one hour’s pay at minimum wage, in addition to the employee’s regular earnings paid for that shift. (If hourly wage exceeds state minimum wage, difference may be credited toward split-shift premium.)
Voluntary Crediting Agreements – Employers with written agreements with their employees for crediting meals or lodging expenses against the minimum wage will need to adjust this crediting to reflect the increase.
Posting The New Wage – Employers will be required to conspicuously post the new wage in an area frequented by employees where it may be easily read during the workday.
Cities With Higher Minimum Wage – Certain California cities, including San Francisco and San Jose, may impose a higher minimum wage and/or adjust their minimum wage more frequently. Employers should ensure they comply with all applicable federal, state and local laws.