California Employers Should Begin to Prepare Now for Minimum Wage Hike

Earlier this month, California Governor Jerry Brown signed into law a measure that will raise the state’s minimum wage to $9 per hour in July 2014, with a second increase to $10 per hour on January 1, 2016.

And there’s no time to waste, writes Gregory Cheng of law firm Ogletree Deakins:

“Employers should not wait until each successive increase in 2014 and 2016 to address the impact of the minimum wage increase by auditing and making adjustments to their practices, timekeeping systems, or existing agreements. Those efforts should be undertaken as soon as possible for employers to have sufficient lead time to address issues that may arise.”

What to evaluate?

1. Salaries of workers on commission:

“California’s commissioned salesperson exemption applies only to employees whose earnings exceed one-and-a-half times the minimum wage if more than half of the employee’s compensation represents commissions. As such, the increase in the state minimum wage likely will result in certain individuals falling below these critical salary thresholds thereby triggering misclassification liability and penalties.” (Ogletree Deakins)

2. Compensation of exempt employees:

“Employers should be aware that the minimum wage increase will also affect the minimum salary that can be paid to employees to make them exempt from California onerous overtime requirements. In order to be exempt from the overtime laws, employees must be paid a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.” (Hirschfeld Kraemer)

3. Split-shift pay, meal credits, and other arrangements:

“The increase in the minimum wage could potentially create exposure under California split shift regulations, undermine existing agreements to credit the value of meals and lodging against the minimum wage, render obsolete agreements to pay employees at reduced hourly rates for travel or on-call time, or impact the viability of overtime provisions contained in collective bargaining agreements.” (Ogletree Deakins)

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