California Employers Hold Onto Your Hats…State Minimum Wage Rates to Increase to $10 Per Hour by 2016

Contributed by Samantha Esmond

On Wednesday, September 25, 2013, California’s Governor, Jerry Brown (D), signed into law Assembly Bill 10 (“AB 10”), which approved a two-dollar ($2.00) state minimum wage rate increase to take effect over the next three (3) years. This new law raises the minimum wage, in the most populous U.S. State, from $8.00 per hour (the current rate) to $10.00 per hour as of January 1, 2016. This will be the first minimum wage raise for the state in approximately six (6) years.

Under this new law, California’s minimum wage will go up in two separate one-dollar ($1) increments. The first bump will take effect on July 1, 2014, and raise the state minimum wage from $8.00 per hour to $9.00 per hour. While, the second one-dollar ($1) increase will take effect on January 1, 2016 and raise the state minimum wage rate to $10.00 per hour.

This scheduled wage increase will place California’s minimum wage well above the current federal minimum wage of $7.25 per hour. California employers should also beware of any additional city and county ordinances, such as San Francisco’s Minimum Wage Ordinance, which set the minimum wage for all work performed within the geographic boundaries of the City of San Francisco at $10.55 per hour. Likewise, the City of San Jose’s Minimum Wage Ordinance currently sets the minimum wage for work performed within the City limits of San Jose at $10.00 per hour. Where there are conflicting requirements in state, local, and federal laws, the employer must follow the stricter standard (i.e., the one that is the most beneficial to the employee).

IMPACT:  California employers should be cognizant of these new statewide minimum wage requirements, including updating any and all employee handbooks and policies together with any required employee postings and notices. Employers must also make any necessary changes to their payroll systems to ensure that these minimum wage increases are applied as they become effective.