Update Applicable to:

All employers who have employees performing work in California

What happened?

The California Department of Finance provided Governor Newsom with a letter noting that California’s minimum wage will increase by 3.5% to $16.00 per hour for all employers as of January 1, 2024.

What are the details?

This change will have several impacts on California employers:

1. Local Minimum Wage Ordinances

1. California has over 35 local minimum wage ordinances. Employers must adhere to the higher state or local minimum wage, with various local rates changing on different dates.

2. Industry Specific Minimum Wages

2. Some localities have specific minimum wage rates for certain industries, such as hotel workers in cities like Long Beach and West Hollywood.
3. The “FAST Act” proposes changes to fast food industry regulations, with a referendum scheduled for November 2024.

3. White Collar Exemptions – Salary Requirement Tied to State Minimum Wage

3. California classifies employees into exempt and nonexempt categories. Exempt employees are not entitled to overtime pay or minimum wage. The “white collar” exemptions include Professional, Executive, and Administrative roles.
4. To qualify as exempt, employees must meet a two-part test: the salary basis and duties test. The salary must be at least twice the state minimum wage.
5. With the 2024 increase, the minimum annual salary for white-collar exemptions rises to $66,560, up from $64,480 in 2023.

4. Computer Professional Exemption Salary Requirement Increases in 2024

4. Certain computer software employees are exempt from overtime under Labor Code section 515.5, but they must meet a minimum salary requirement.
5. In 2023, the minimum hourly rate increased to $53.80, monthly to $9,338.78, and annually to $112,065.20. Further adjustments will be announced in October 2023.

For more information, please see the links below:

Law Firm Article 1, Article 2, Article 3, Article 4, Article 5

What do employers need to do?

Employers should review exempt employee classifications, create location-specific nonexempt employee lists, and audit payroll processing for compliance. Additionally, an initiative aiming to raise California’s minimum wage (Link), adjusted for cost of living, is slated for the November 2024 ballot.  If passed, by January 1, 2025, for employers with 26 or more employees, the statewide minimum wage would increase to $18 per hour, and employers with 25 or fewer employees would pay the same wage on January 1, 2026. 

These changes necessitate careful monitoring and adjustments by California employers to ensure compliance with evolving minimum wage requirements.

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