Question: What changes are coming to California’s minimum wage in 2017?
Answer: Pursuant to a bill signed by Governor Brown earlier this year, on January 1, 2017, California will begin a multi-phase process of incrementally increasing the minimum wage to $15.00 per hour by January 1, 2023. The minimum wage in California is currently $10.00 per hour. Some cities around California have higher minimum wages. By comparison, the federal minimum wage is currently $7.25 per hour. When there is a conflict between the federal, state, and local laws on the minimum wage, employers must pay the highest applicable minimum wage.
Under California’s new law, the time frame for implementation of the minimum wage increase will depend on the size of the employer. For employers with 26 or more employees, the increase in the minimum wage will be according to the following timeline: January 1, 2017: $10.50 per hour; January 1, 2018: $11.00 per hour; January 1, 2019: $12.00 per hour; January 1, 2020: $13.00 per hour; January 1, 2021: $14.00 per hour: January 1, 2022: $15.00 per hour.
For employers with 25 or fewer employees, the increase in the minimum wage will be according to the following timeline: January 1, 2018: $10.50 per hour; January 1, 2019: $11.00 per hour: January 1, 2020: $12.00 per hour: January 1, 2021: $13.00 per hour: January 1, 2022: $14.00 per hour: January 1, 2023: $15.00 per hour. Of course, if an employer’s number of employees increases beyond the 25-employee threshold, it will have to follow the law for employers with 26 or more employees.
After the minimum wage has reached $15.00 per hour, before August 1 of each year, the Director of Finance will do calculations based on the U.S. Consumer Price Index to determine if the minimum wage will increase for the following year and if so, by how much.
The new law has provisions that may slow the increases depending on economic conditions in the state. On or before July 28, 2017, and on or before July 28 of each year until the minimum wage reaches $15.00 per hour, the Director of Finance will annually make a determination as to whether economic conditions can support the minimum wage increase. Based on that information, the Governor may make a determination to temporarily suspend the minimum wage increases that are scheduled. However, the Governor can do this no more than two times.
Employers should review the size of their workforce to determine the applicable time frame for California’s minimum wage increases. In addition, as this new law takes effect, employers should remember that they must pay exempt employees at least two times the state minimum wage for full-time employment. For employers with 26 or more employees, the exempt employee salary threshold will increase pursuant to the following schedule: January 1, 2017: $43,680; January 1, 2018: $45,760; January 1, 2019: $49,920; January 1, 2020: $54,080; January 1, 2021: $58,240; January 1, 2022: $62,400. For employers with 25 or fewer employees, the exempt employee salary threshold will increase pursuant to the following schedule: January 1, 2018: $43,680; January 1, 2019: $45,760; January 1, 2020: $49,920; January 1, 2021: $54,080; January 1, 2022: $58,240; January 1, 2023: $62,400.