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August 2022: Inflation Disrupts California’s Minimum Wage Rate Schedule, Prompting Pay Increase in 2023

16 Aug


Update Applicable to:
All employers in the state of California.

What happened?
On July 27, 2022, the Director of California’s Department of Finance sent a letter to Governor Gavin Newsom and other state officials, noting that the Department had determined poor economic conditions necessitated expedited increases to the minimum wage.

What are the details?
Due to changes in the consumer price index (CPI) from July 1, 2021, through June 30, 2022, the state’s minimum wage law requires the state to bring forward by one calendar year – from 2024 to 2023 – the date when it must annually adjust the minimum wage rate.

Rather than, as expected, a $15-per-hour minimum wage is applied to employers of all sizes in 2023, the minimum wage will increase to $15.50 per hour for all employers on January 1, 2023. The minimum wage law requires the rate adjustment to be the lower of 3.5% or the rate of inflation – 7.9% during the relevant period – and 3.5% of $15 is 50 cents.

The change to the minimum wage rate will affect more than just employees currently paid at or near the state minimum wage. It will also affect whether employees will (continue to) qualify to be exempt from state minimum wage and/or overtime requirements, the dollar amount of a sub-minimum wage an employer might be able to pay certain employees and whether various state laws apply to or exclude employees who are paid a specific percentage more than the state minimum wage, etc.

Below are some key points presented by our trusted source, Littler:

For more information, please see the links below:

Article 1Article 2

What do employers need to do?
Employers should review the links provided above and review current pay rates for non-exempt and exempt employees to see how those amounts compare to what California law will require next year and what impact, if any, this unscheduled pay increase might have on their labor budget.

Vensure will continue to monitor this and will update once more information has been received.

Need help understanding how changes to employment laws will affect your business?

Learn more about how Vensure's California PEO services can help you navigate complex employment laws and keep your business compliant.

This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.

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