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Changes in Minimum Wage

In recent news we heard about the minimum wage increase for federal contractors in hopes this will result in an increase in the minimum wage for all workers in America. It is important for you to know what the minimum wage is for your state(s) of operation. In cases where the state minimum wage is higher than the federal employees must be paid the higher of the two rates. In addition to the recent federal change many states have recently passed a minimum wage increase and many others have proposed legislation on their agenda to address this issue and hopefully raise their minimum wage. This article will focus on California and their 2014 minimum wage increase.

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. Many companies are receiving mailings from poster companies that look on their face to be government notices saying the company must by the poster mentioned on the notice in order to be in compliance. Please note that this is a marketing piece and the poster can be obtained free of charge at the site mentioned previously. 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. The language in Labor Code Section 515 reads, in part, “The Industrial Welfare Commission may establish exemptions from the requirement that an overtime rate of compensation be paid…, and earns a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.” (http://law.onecle.com/california/labor/515.html). 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. Today the current minimum salary required for exemption is $33,280.

It is imperative to understand and remember that paying the minimum salary alone itself will not qualify a position for exempt status, there are also duties and time spent tests that must be met. In addition, all tests must be met in order to qualify for exempt status. This means if a company has positions that currently meet all the tests for exempt status but do not raise salaries to reflect the appropriate minimum salary required for exemption outlined previously those positions will revert to non-exempt status making them overtime eligible. California employers should begin preparing for these upcoming changes as they do have a substantial financial impact especially to smaller employers.