It’s Heating Up: Several California Cities Prepare For Mid-Summer Minimum Wage Increases

We are halfway through 2019, and while many employees prepare for summer vacation, California employers in various cities should brace themselves for an additional round of minimum wage increases on July 1, 2019.

Another raise, already?

As you may recall, on January 1, 2019, California raised the statewide minimum wage rate to $12.00 per hour for employers with 26 or more employees, and $11.00 per hour for employers with 25 or fewer employees. And the California minimum wage is set to increase to $15.00 per hour for all employers by January 2023.

To complicate matters further, many local ordinances mandate minimum wage rates above the state minimum. In fact, over 25 California municipalities have enacted their own minimum wage rates, with several already mandating a minimum wage of at least $15.00 per hour, including: Cupertino, Berkeley, El Cerrito, Emeryville, Los Altos, Mountain View, Palo Alto, Richmond, San Francisco, San Jose, San Mateo, Santa Clara, and Sunnyvale. This exceeds the California minimum wage and is far above the federal minimum wage rate of $7.25.

While several municipalities plan to raise their minimum wages annually on January 1 of each year, several are poised to raise their minimum wage rates on July 1, 2019, as follows:

  • Alameda: $13.50 per hour
  • Berkeley: $15.59 per hour
  • Emeryville: $16.30 per hour
  • Long Beach Hotel Workers and Concessionaires:
    • $14.97 per hour (Hotel workers)
    • $14.72 per hour (Concessionaires)
  • Los Angeles City and County (including Malibu, Pasadena and Santa Monica):
    • $14.25 per hour (employers with 26 or more employees)
    • $13.25 per hour (employers with fewer than 26 employees)
    • $16.63 per hour (Hotel workers at Los Angeles hotels with 150 rooms or more and at all Santa Monica hotels)
  • Milpitas: $15.00 per hour
  • San Francisco: $15.59 per hour

In addition to increasing the minimum wages annually on July 1, several of these municipalities intend to reach and/or surpass $15.00 in the near future through annual cost of living adjustments based on the consumer price index.

California Statewide Minimum Wage Remains Unchanged

Despite the July raises, California’s statewide minimum wage rate will not change until January 1, 2020. And California’s minimum wage is set to adjust on a yearly basis through January 1, 2023, as follows:

Schedule for California Minimum Wage Rates 2019-2023
Date Minimum wage for employers with fewer than 26 employees Minimum wage for employers with 26 employees or more
January 1, 2019 $11.00 $12.00/hour
January 1, 2020 $12.00 $13.00/hour
January 1, 2021 $13.00 $14.00/hour
January 1, 2022 $14.00 $15.00/hour
January 1, 2023 $15.00

California employers should review their compensation policies for non-exempt employees and ensure their payroll systems address the new state and local minimum wage rates.

California’s Minimum Salary Threshold For Exempt Employees Remains Unchanged

Although these minimum wage changes primarily affect non-exempt, hourly employees, employers should keep in mind that exempt employees (otherwise not entitled to overtime) must earn a minimum annual salary equal to two times the state’s minimum wage rate. Therefore, the January 2019 minimum wage raises increased the annual salary thresholds for exempt employees to $49,920 (from $45,760) for employers with 26 or more employees, and to $45,760 (from $43,680) for employers with 25 or fewer employees. The July 2019 increases do not change these thresholds.

Salary Thresholds For Overtime May Increase On The Federal Front

At the federal level, while minimum wage remains $7.25 per hour, the Department of Labor Wage and Hour Division has proposed rulemaking to increase the number of workers eligible for overtime. Currently, employees with a salary below $455 per week ($23,660 annually) must be paid overtime if they work more than 40 hours per week. The proposal would boost the threshold to $679 per week (equivalent to $35,308 per year), thus potentially increasing employers’ obligation to pay overtime to a larger population of their workforce.

For more information on the updated minimum wage rates or the application of these changes to your workforce, please contact a member of Orrick’s employment practice.