On July 1, 2014, California’s minimum hourly wage will increase from $8.00 to $9.00 per hour. The minimum wage will increase again on January 1, 2016 to $10.00 per hour. Most employers are aware of the increase and are prepared to comply by paying their minimum wage workers $9.00 per hour starting July 1, 2014. However, what many employers have overlooked is that the increase affects their minimum salary obligations for their white collar exempt employees.
Under California law, if an employer classifies an employee as exempt under the “executive,” “administrative,” or “professional” exemption (“white collar” exemptions), they must meet certain exemption requirements. One requirement is that the employee earns a set weekly salary of no less than two times the state minimum wage for a full-time employee. Currently that wage is $640.00 per week (or $33,280 per year). On July 1, 2014, the set salary requirement will increase to $720 per week (or $37,440 per year).
As a result, in addition to increasing the hourly rate of pay for minimum wage employees, employers should evaluate the compensation paid to their white collar exempt employees and ensure it meets the minimum salary requirement. Failure to pay the minimum salary requirement can result in the loss of the exemption which can open a whole host of potential liability – e.g. failure to pay overtime.
Finally, the California Department of Industrial Relations (aka Labor Commissioner) has updated all Wage Orders to reflect the new minimum wage (see section 4). Employers should post the updated Wage Order applicable to their industry or business along with their other employment law posters. Wage Orders can be obtained at the Labor Commissioner’s website – www.dir.ca.gov.