Employers have received clarification on California’s new minimum wage law. The California DLSE recently released new FAQs (“New Minimum Wage Phase in Requirement 2017-2023 SB 3 — Frequently Asked Questions“) addressing California’s new tiered minimum wage system.
Among the topics addressed are two important questions:
- What employees are counted for the 26-employee threshold?
- If an employer’s headcount increases above 25 employees, at what point is the employer required to pay the higher minimum wage?
With respect to the first question, the DLSE clarifies that all workers who are not “bona fide” independent contractors are considered employees and “count” towards the 26 employee threshold. This includes exempt employees, salaried executives, part-time workers, minors, and new hires. It also includes any workers who work both in and outside California.
NOTE: California has many cities that have its own local minimum wages. In these ordinances, the city might have a different standard for “counting employees”. For example, the City of Los Angeles’ minimum wage ordinance counts only individuals working in L.A. at least two hours per week; while the city of Pasadena counts all employees in the United States.
With respect to the second question, the DLSE clarifies that the headcount is determined on a per pay period basis. In other words, if the employee headcount increases to 26 employees in one pay period, then the minimum wage for that pay period (and any other pay period when employee headcount is above 25 employees) is the “large employer” minimum wage.
NOTE: This implies that an employer can fluctuate minimum wage (i.e. drop minimum wage to the “small employer” minimum wage) if the employee headcount falls below 26. While that may be permissible, it is not recommended because of the confusion it will cause payroll and employees and also because of the potential negative impact on employee morale.
Take Home For Employers
It is recommended that all California employers review these FAQs and verify that they are complying with all aspects of California’s minimum wage laws.
As mentioned above, several cities have enacted their own local minimum wage laws. It is recommended that employers check both state and city laws when determining minimum wage for their employees.
This information was originally shared by e-Place Solutions, Inc.
Image courtesy of porbital and freedigitalphotos.net
