On July 1, 2014, the minimum wage in California increased to $9.00 per hour from $8.00 per hour. The last increase took place on January 1, 2008 and raised the minimum wage from $7.50 to $8.00 per hour. The next increase will take place on January 1, 2016, when the minimum wage in California will become $10.00 per hour. The Labor Commissioner’s website contains a History of the California Minimum Wage.
According to the Bureau of Labor Statistics, in 2012 only about 1.5 million hourly workers earned the federal minimum of $7.25 an hour—this group represents only about 4.7% of the nation’s hourly-paid workers and 2.8% of all workers. However, one of the most powerful effects of the minimum wage may come from its ripple effect on workers making slightly more than the minimum wage. Due to this ripple effect, the Brookings Institution expects that workers earning up to 150% of the minimum wage could see a wage increase from a higher minimum wage, at least at the federal level. So, any increase in the minimum wage in California is bound to have a similar ripple effect on wages in California.
In light of the increase in the minimum wage, employers should make sure that they are in compliance with the law. This includes more than simply making sure that hourly-paid employees are earning at least $9.00 per hour. For example, the minimum salary that an exempt, salaried employee can earn is dependent on the minimum wage and a change in the minimum wage may necessitate an increase in salary for such employees.
In addition to making sure they are following California law, employers must now make sure they are not violating local laws, such as city ordinances. More and more, cities are considering setting their own minimum wage. For example, on June 2, 2014, the City Council of Seattle, Washington passed a local ordinance that increased the minimum wage in the city to $15.00 per hour.
The concept of a minimum wage set by a city makes some logical sense, as the economic reality of a city may differ greatly from that of a state as a whole. Just as states set their own minimum wages, in part based on local economic conditions, cities are now attempting to set minimum wages that are in step with local economic situations. For employers, this means that they must now be in compliance with federal, state, and local minimum wage laws.
Sean Haddad is a business and employment attorney at Appell Shapiro, LLP in Los Angeles, California.