Not to be outdone by New York’s pending move to increase its minimum wage to $15.00 per hour for non-exempt employees in the coming years, on April 4, 2016, California Gov. Jerry Brown signed into law a bill that will increase California’s statewide minimum wage to $15.00 per hour by 2022. The bill sets out gradual increases in the California minimum wage, starting with a move up to $10.50 per hour January 1, 2017, for all employees working for an employer of 26 or more employees. Smaller businesses with 25 or fewer employees will follow the same incremental increases as larger employers, but starting a year later, with a move up to $10.50 per hour January 1, 2018.
The incremental increases every January 1 will be as follows:
While the minimum wage increase will be celebrated by many as providing all of California’s workers with a livable wage, Gov. Brown himself admitted, “Economically, minimum wages may not make sense.” Gov. Brown’s hesitations regarding the economic effect of the minimum wage hike echo the arguments of many opponents of the minimum wage increase who have cited business closures and increased unemployment in areas and sectors of California where local minimum wage increases have already taken effect, even though many of these already-impacted areas are the more affluent areas of the state. Employers across the state will surely now be weary of the increased cost of labor and the risks involved with increasing prices to offset the additional costs.
The bill includes a provision that would allow the governor to temporarily suspend the scheduled minimum wage increases in the event of an economic recession. The governor’s ability to temporarily suspend the increase does not come into effect until July 2017, and only allows for two such temporary suspensions.
The minimum wage bill signed by Gov. Brown also included a provision providing in-home, supportive-services workers with up to three paid sick days annually.
Even before the governor’s signing into law the statewide minimum wage increase, many California cities, such as San Francisco and Los Angeles, already passed their own local measures to raise their own minimum wages to $15.00 per hour in the near future. For employers with employees spread out across the state, the minimum wage increase should serve as a reminder of the need to audit employee pay to ensure compliance not only with state labor laws, but with local labor laws as well. Employers should also be conscious of the recent requirements of the California Fair Pay Act, as well as other statutory provisions, that require the auditing and revision of pay practices and wage reporting and disclosure rules to ensure full compliance with the states mandates.
When expanding operations into a new territory, employers should also immediately become familiar with the applicable local minimum wage ordinances, if they surpass statewide requirements.
The statewide increase means employers in all corners of the Golden State must implement regular review practices in order to prepare for each time the incremental increases take effect over the next seven years.