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california minimum wage increase

California Wage Increases on July 1, 2014

REMINDER!  California’s Minimum Wage increases on July 1st

California has increased its minimum wage in a two-step process. In the first step California employers are required to pay a minimum wage of $9.00 per hour effective July 1, 2014. The second step raises the minimum wage to $10.00 per hour effective January 1, 2016. The new California Minimum Wage Posting required to be posted by all employers can be found at http://www.dir.ca.gov/wpnodb.html. The new posting must be displayed beginning July 1, 2014.

California employers must also keep in mind that the minimum salary required for exempt status is directly tied to the minimum wage. This means when the minimum wage increases so will the minimum salary required for exemption. The new minimum salary required will be $37, 440 beginning July 1, 2014 and then $41,600 beginning January 1, 2016. The minimum salary required for exempt status is defined as “no less than two (2) times the state minimum wage for full time employment. Full time employment is defined in Labor Code Section 515(c) as 40 hours per week.”

It is imperative to understand paying the minimum salary alone itself will not qualify a position for exempt status, as there are also duties and time spent tests that must be met. All three tests must be met in order for a position to qualify for exempt status.  If a company has positions that currently meet all the tests for exempt status, but do not increase the exempt salaries to at least $37,400.00 on July 1, 2014 those positions will revert to non-exempt status making them overtime eligible. This will also be the case on January 1, 2016 when the minimum salary required for exemption increases to $41,600.00.

Effective Date Minimum Wage Minimum Salary required for Exemption*
Prior to July 1, 2014 $8.00 $33,280.00
July 1, 2014 $9.00 $37,440.00
January 1, 2016 $10.00 $41,600.00

California employers should begin preparing for these upcoming changes as they do have a substantial financial impact especially to smaller employers.