California Minimum Wage: All You Need to Know
By Jennifer Brust
If you run a business in California, you likely know that the California minimum wage is set to continue increasing.
The California minimum wage has gradually increased each year since 2016 when it was increased to $10 per hour from a previous high of $9. However, as of January 2021, you may need to pay your employees a little more. Here is what you should know about the state’s minimum wage hike.
What Is the Current California Minimum Wage?
As of January 1, 2021, the minimum wage in California is $13 per hour for employers with 25 or fewer employees and $14 per hour for those with 26 or more employees. This is an increase of $1 per hour compared to the previous minimum wage.
The state of California began increasing the minimum wage in 2016 as part of a plan to gradually increase the hourly wage to $15 per hour across the entire state. The increases were introduced in Senate Bill No.3 (SB-3) in 2016.
At the time, the California minimum wage was $10 per hour. This applied to businesses with any number of employees.
The next wage hike occurred in 2017 but only applied to businesses with 26 or more employees. The new wage was $10.50 per hour. The wages increased by $0.50 in 2018 and $1 in 2019 and 2020.
Sheepherders are a unique category of workers with a separate monthly minimum salary. Employers with at least 26 employees must pay sheepherders a minimum of $2,488.97 per month. Employers with 25 or fewer employees pay sheepherders $2,311.24 per month.
When Does the Minimum Wage Increase Again?
The California minimum wage is set to increase again in 2022 or 2023, depending on the number of employees that you employ. Businesses with 26 or more employees must pay workers a minimum of $15 per hour by January 2022.
If your business has 25 or fewer employees, you must start paying a minimum of $14 per hour by January 2022 and $15 per hour by January 2023. Smaller businesses have an extra year before needing to reach the $15 minimum.
Does State Minimum Wage Override Local or Federal Wages?
The state minimum wage overrides Federal minimum wages but does not override local minimum wages. Many cities and counties in the state have minimum wages that are currently higher than the state’s wage.
For example, Berkeley set a minimum wage of $16.07 per hour, making it one of the highest-paying jurisdictions in California.
The City of Los Angeles also has a higher minimum wage. Employers with 26 or more employees must pay $15 per hour. If you have 25 or fewer workers, your minimum wage is $14 per hour.
Other examples of cities with higher wages include:
- Oakland – $14.36 per hour
- San Jose – $15.45 per hour
- San Francisco – $16.07 per hour
- San Diego – $14 per hour
If you live in a city or county with a higher minimum wage, you must pay the local wage.
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Are There Exceptions to California’s Minimum Wage Laws?
California employers must pay the minimum wage to applicable employees, even if an employee accepts a lower pay. However, the state of California allows exceptions to the minimum wage for specific types of employees.
Some employees may be entitled to a reduced minimum wage or have no minimum wage at all. The main categories of exceptions include:
- Learners
- Immediate family members
- Disabled employees
- Camp employees
- Outside salespersons
Learners are individuals working in jobs with no previous experience. In specific situations, learners may be paid 85% of the current minimum wage during their first 160 hours of work. Camp employees may also be paid 85% of the minimum wage.
Immediate family members and certain outside salespersons are not subject to the minimum wage. Outside salespersons include individuals who spend most of their working time away from the place of business.
Disabled employees may be paid wages set by the Labor Commission. The set wages last for one year. However, employers may attempt to renew the set wage each year.
Certain nonprofit organizations may receive special licenses that allow them to pay employees less than the current California minimum wage.
Minors must also receive the state’s minimum wage. In some states, employers may pay minors a lower wage. California’s wage laws do not distinguish between adults and minors.
Businesses with 26 or more employees must pay workers a minimum of $15 per hour by January 2022.
Do Independent Contractors Have a Minimum Wage in California?
Independent contractors are not subject to the state’s minimum wage laws. The laws only apply to employers as a protection for employees. In most cases, an independent contractor is treated as an employer that provides services.
What Is the Minimum Wage for Restaurant Waitstaff in California?
California does not have a separate “tipped minimum wage” for waitstaff and other workers that receive tips. Employers must pay tipped employees the same minimum wage that applies to other workers.
Waitstaff in California is entitled to a minimum wage of $14 per hour or $13 per hour depending on the number of employees at the restaurant.
Additionally, employers may not apply tips toward their obligation to pay the minimum wage. The tips that the waitstaff receive are theirs to keep and not included in their minimum wage.
What Happens When an Employer Does Not Pay Minimum Wage?
Employees who do not receive the state’s minimum wage may file a wage claim with California’s Division of Labor Standards Enforcement. Employees may also file a lawsuit to attempt to recover lost wages.
After an employee files a claim, a Deputy Labor Commissioner is assigned to the case and reviews the details of the claim. A conference is arranged to assess the validity of the wage claim. Both parties may present evidence at the conference. If the issue is not resolved, it may move to a court hearing.
Last Thoughts on Minimum Wage in California
Understanding the latest California minimum wage laws can be confusing for small business owners. However, you must comply with the laws to avoid penalties. To ensure that your employees receive appropriate pay, request advice from experienced professionals.
Contact us today to discuss the implications of California’s minimum wage increase.
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