Question:

I read in the newspaper that the Senate voted to increase the federal minimum wage. What impact does this have on California employers? Will I be required to pay my employees at the federal level instead of the California one? I am never sure which laws are supposed to apply to me. Thanks.

Answer:

You are correct, the U.S. Senate recently voted overwhelmingly to increase the federal minimum wage from $5.15 to $7.25 over a two-year span. The bill now goes back to the House for further discussion. Assuming that the new federal minimum wage does become law, many California employers are curious as to how the new law may affect them.

Most employers in California are subject to both the federal and state minimum wage laws. As a result of this dual coverage, the question often arises as to what an employer is supposed to do in the event that there is a conflict between the two bodies of law. The rule in California is that the employer must follow the stricter standard, i.e., the one that is most beneficial to the employee.

As of January 1, 2007, the minimum wage in California is $7.50 per hour, which is a full 25 cents more than the maximum newly proposed federal minimum wage. As previously stated, California employers are required to follow the stricter law when there is a conflict. Therefore, since California’s current law requires a higher minimum wage rate than the federal law does, all employers in California who are subject to both laws are required to pay their employees at the state minimum wage rate of $7.50 (unless their employees are exempt from the California Wage Orders’ provisions regarding compensation).

The increase in the federal minimum wage therefore does not have much, if any, immediate impact on California employers. However, it is possible that at some point in the future the federal minimum wage could be raised to the point where it exceeded the rate in California. Should that happen, California employers would once again be required to comply with the higher rate (which would then be the federal rate) because that law would be deemed to be stricter and more favorable to employees. The rule of thumb, therefore, is that whichever law provides for the highest hourly wage, that is the law that will apply to a California employer who is subject to both federal and state laws.

Employers can face liability for failure to pay the required minimum wage. Employees who believe that they have been underpaid may file a claim with the Division of Labor Standards Enforcement (DLSE) of the State Labor Commissioner’s Office, and can also file a private lawsuit in order to recover lost wages. In addition, former employees who no longer work for a particular employer can make a claim for waiting time penalties related to unpaid wages. These penalties are typically a full day’s pay at the individual’s former daily rate for every day that has passed since the violation, for a maximum of 30 days. Waiting time penalties can therefore be significant, and are often several thousand dollars.

You should also keep in mind that the minimum wage is not negotiable. The payment of minimum wage is an obligation of the employer and cannot be waived by agreement, including collective bargaining agreements. For more information regarding the rules related to minimum wage, you can visit the California Department of Industrial Relations’ webpage at: http://www.dir.ca.gov
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