California Employers & The Increasing Minimum Wage
California enacted a yearly increase in minimum wage across all industries which started in 2017 and will continue until 2023.
The law distinguishes between a set minimum wage for employers with 25 employees or less, and those with 26 or more employees. When a business calculates their headcount, there are certain exemptions to keep in mind, as outside salespersons, individuals who are the parent, spouse, or child of the employer, and apprentices will not count towards the total amount of employees for the purposes of the minimum wage law.
Effective January 1, 2021, the California minimum wage increased to $14 per hour for employers with 26 or more employees, and to $13 per hour for employers with 25 or fewer employees. Local entities within California have their own minimum wage ordinances, which can be higher than those set by the Governor of California. If there is a conflict between the federal, state, and local requirements, the employer must adopt the requirement with the higher wage that is most beneficial to the employee.
San Diego County does not distinguish by headcount and increased its minimum wage to $14 per hour, effective January 1, 2021. Effective July 1, 2021, Los Angeles will increase its minimum wage to $15 per hour regardless of headcount, and San Francisco will also increase its minimum wage to $16.32 effective July 1, 2021.
Of note, an employer is not exempt from meeting the minimum wage requirement if an employee agrees to be paid less. Under the law, this requirement may not be waived by the employee. In industries with alternative compensation such as tips, those tips may not be used to count towards the minimum wage requirement.
California has seen an average of a $1 increase per year since 2017, and this trend can be expected to continue. Los Angeles has had a more erratic pattern with increases ranging from $1.50 per year, to a $0 increase between 2020 and 2021 for employers with over 26 employees. San Diego has enacted increases ranging from $1 to 50 cents per year, but the last three years have seen a consistent $1 increase.
Overall, it is important to business to stay diligent and up to date on all minimum wage changes at both the state and local level.