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On July 1, 2014, California’s minimum wage increases to $9 per hour from the existing minimum wage of $8 per hour. This is the first increase to the state minimum wage since January 1, 2008. The minimum wage will increase again to $10 per hour on January 1, 2016.
Employers need to prepare for the minimum wage increase and examine all pay practices that might be affected. Hint: There are more than you might think!
California employers must pay employees no less than the state minimum wage per hour for all hours worked.
But the minimum wage increase does not just affect your nonexempt workers who receive the minimum wage; the increase also affects your classification of employees as exempt versus nonexempt and creates other ramifications.
Breaking News: The Department of Industrial Relations published revised Wage Orders that reflect the new minimum wage rate, as well as revised meal and lodging credit information. California has 17 Wage Orders. Once you determine which Wage Order applies to your business, you must post a copy of it in your workplace where it is available for all employees to view.
The minimum wage rate change affects overtime.
Effective July 1, 2014, employees who work for minimum wage and perform work that qualifies for overtime must be paid $13.50 per hour for time and one-half or $18 per hour for double-time.
This is an increase from the pre-July rates of $12 per hour (time and one-half) or $16 per hour (double-time).
Employers should be mindful of the effect of the minimum wage increase on exempt/nonexempt classifications and ensure that employees meet the salary basis test for the particular exemption claimed.
Effective July 1, 2014, the minimum salary requirements for the administrative, professional, and managerial exemptions will increase to $3,120 per month or ($37,440 annually), from $2,773.33 per month (or $33,280 annually).
The minimum wage increase affects employer notice requirements related to wage notices, itemized wage statements and the minimum wage posting.
Employers must post California’s official Minimum Wage Order (MW- 2014) in a conspicuous location frequented by employees. The official notice has been updated by the Department of Industrial Relations and includes both the July increase and the second increase for January 1, 2016.
California employers must also provide each employee with an itemized statement, in writing, at the time wages are paid (Labor Code Section 226).
Among other mandatory information, the itemized wage statement must include all applicable hourly rates in effect during the pay period and the corresponding number of hours the employee worked at each hourly rate.
Meals and Lodging
Most of California’s Wage Orders allow employers to credit meals and lodging furnished by the employer toward the employer’s minimum wage obligation (Section 10 of the Wage Orders). The new credit amounts for meals and lodging are listed on the official Minimum Wage Order (MW-2014).
The minimum wage increase also affects piece-rate employees. Piece-rate workers must receive at least minimum wage for each hour worked.
Draws Against Commissions
If an employee receives a draw against commissions to be earned at a future date, the “draw” must be equal to at least to the minimum wage and overtime due to the employee for each pay period (unless the employee is exempt).
When an employer requires that employees use certain tools or equipment or when the tools or equipment are necessary to perform the job, the employer must provide and maintain the tools or equipment.
Only employees whose wages are at least two times the minimum wage can be required to provide and maintain hand tools and equipment customarily required by the trade or craft in which they work.
The subminimum wage rate will increase to $7.65 per hour (from $6.80 per hour) effective July 1. Federal and state laws provide different definitions of learners.
- Display a poster that includes the current official Minimum Wage Order (MW-2014). CalChamber’s 2014 California and Federal Employment Notices poster includes the required minimum wage update.
- Update any necessary payroll documentation.