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Most employers will begin paying a higher minimum wage Jan. 1, 2020

Nearly all employers in California will begin paying their employees a higher minimum wage — either the new state or local minimum wage, whichever is higher — in the new year.

Effective Jan. 1, 2020, the state minimum wage for employers with 25 or fewer employees will increase to $12 per hour from the current $11, and the state minimum wage for employers with 26 or more employees will increase to $13 per hour from the current $12.

But employers of every size must pay the local minimum wage in the employer’s place of business if it is higher than the state minimum wage.

Minimum wages or “living wages” are rising more quickly than the state minimum wage in some areas of California; employees in 27 cities or counties are already paid an hourly minimum wage ranging from $12 to $15.65. Many local minimum wages will increase again in either January or July 2020. Some wages will increase by a fixed dollar amount, while others are tied to the regional consumer price index. Because the local wage increases vary across municipalities and according to the number of employees, employers should review their individual city ordinances and follow wage posting requirements to ensure compliance.

CDA members can also view the CDA Practice Support resource “Minimum Wage and Paid Sick Leave Ordinances by City/County,” which provides details about the 2020 local minimum wage increases along with basic paid sick leave requirements in California.

Pay requirements for exempt employees

Employers with exempt employees should evaluate employees’ salaries because exempt employees in California generally must earn a minimum monthly salary of no less than two times the state minimum wage for full-time employment.

The 2020 minimum salary threshold for these exemptions is as follows:

  • For employers with 25 or fewer employees, the minimum monthly salary test is $4,160.00 per month ($49,920 per year).
  • For employers with 26 or more employees, the minimum monthly salary test is $4,506.67 per month ($54,080 per year).

Again, when paying employees, employers must follow the stricter wage standard — specifically, the one that is the most beneficial to the employee.

Legislation signed into law in 2017 by former Gov. Jerry Brown requires California’s minimum hourly wage to rise again by $1 in January 2021 and annually thereafter until it reaches $15. The law does allow the governor to suspend a scheduled wage increase in the event of an economic slowdown (defined as negative job growth combined with negative retail sales for a specified time period) or if a budget deficit is forecasted for the current budget year up to two additional years. 

Some employees, including outside salespersons or the employer’s spouse, child or parent, are exempt from the state minimum wage law.

The new downloadable California Minimum Wage notice will be available soon on the Department of Industrial Relations’ website. FAQ are available now.

See the CDA Practice Support resource “Minimum Wage and Paid Sick Leave Ordinances by City/County” for details on local wage increases taking effect in 2020 and beyond. Find it in the Practice Support resource library.

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