Resignations by employees are a contractual matter in California. In other words, the resignation is an offer that the employee can withdraw before the employer accepts it. After it is accepted by the employer, the resignation is final. A recent case determined that the employee’s resignation was final even when the employee’s disability – unbeknownst to the employer at the time the employer accepted the employee’s resignation – caused the employee to resign.
Resignations by employees are a contractual matter in California. In other words, the resignation is an offer that the employee can withdraw before the employer accepts it. After it is accepted by the employer, the resignation is final. A recent case determined that the employee’s resignation was final even when the employee’s disability – unbeknownst to the employer at the time the employer accepted the employee’s resignation – caused the employee to resign.
In Featherstone v. Southern California Permanente Medical Group, (Cal. Ct. App., Apr. 19, 2017, No. B275225) 2017 WL 1399709, the employee resigned by telephone, effective immediately, and confirmed her resignation in writing. The employer accepted her resignation. Subsequently, the employee attempted to rescind her resignation and alleged that a temporary disability resulting from her medication caused her to resign. When her employer did not allow her to rescind her resignation, the employee sued for discrimination based on disparate treatment because of her disability. In order to prevail, the employee had to demonstrate that she suffered an adverse employment action. She could not because her resignation was voluntary since the employer did nothing to coerce her resignation. Additionally, the employee was no longer an employee after she resigned, so the employer’s refusal to accept rescission of her resignation was not an adverse employment action. Since she could not prove an adverse employment action, the employer prevailed.
Employers who want to accept an employee’s resignation should act quickly before the employee withdraws the resignation. At will employees generally have no right to rescind voluntary resignations after acceptance unless they have entered other contractual arrangements with their employers permitting rescission. As demonstrated by Featherstone, a disability that allegedly causes the resignation will not undue a resignation either. Employers should keep in mind that the Featherstone employer was unaware of the employee’s disability at the time it accepted the employee’s resignation. The result would have been quite different if the employer had known about the disability before accepting the resignation.
California employers are required to authorize and permit employees who are not exempt from overtime (“non-exempt employees”) to take paid rest breaks, during which time they are relieved from work. Generally, employees paid on a commission basis are paid for their productive time, their sales. A recent court decision determined that when non-exempt employees are paid on a commission basis, employers must separately account, and pay, employees for their rest breaks.
In Vaquero v. Stoneledge Furniture LLC, (Cal. Ct. App., Feb. 28, 2017, No. B269657) 2017 WL 770635, the California Court of Appeal looked at a compensation system for employees paid on a commission basis. The employees were guaranteed a minimum weekly salary. When their commissions were insufficient to equal or exceed the minimum weekly salary, they were paid a minimum hourly rate for the shortage that was treated as an advance on future commissions. When commissions exceeded the weekly guarantee, the employer deducted the hourly compensation previously advanced to the employees. The Court of Appeal determined that this was illegal because the employees were not compensated for their rest breaks. Even when the employees were paid a minimum hourly rate, that compensation was taken back when the employees earned enough commissions to repay the hourly wage advance. In other words, the employees were only compensated for their productive time and not for their nonproductive time when they were not making commissions, such as rest breaks. This defeated the purpose of a rest break, which is not to work.
Rest break violations are common wage and hour claims made by employees against employers. Employers who do not pay their employees on an hourly basis should ensure that they do not reduce their employees’ wages for rest breaks by paying employees pursuant to a commission, piece-rate or other compensation system that does not provide compensation for rest breaks. Employers should also ensure employees are paid for other nonproductive time, such as company trainings and meetings.
California employers have to authorize and permit paid rest breaks to employees who are not exempt from overtime (i.e., non-exempt employees). On December 22, 2016, the California Supreme Court in Augustus v. ABM Security Services, Inc., 2 Cal.5th 257 (2016) ruled that an employer does not meet its rest break obligation when it requires its employees to take on-duty rest breaks.
Augustus involved a class action suit filed on behalf of ABM’s security guards. The guards alleged that ABM failed to provide uninterrupted rest breaks as required by California law. ABM acknowledged that it required its security guards to keep their radios and pagers on, and to respond to needs as they arose (such as escorting tenants to parking lots or responding to emergency situations) during their rest periods. The Supreme Court determined that being “on call” in the manner described by the security guards compelled the employees to “remain at the ready and capable of being summoned to action.” It further noted that the personal activities for which rest breaks were designed, such as going for a walk, completing a phone call, or arranging child care, could not be performed during on-call rest breaks. Given this, the Court held that employers must relinquish any control over how employees spend their breaks and relieve employees of all duties, including any obligation to remain on call. However, the Court noted that its holding did not preclude employers from “reasonably rescheduling” rest periods when needed. It also indicated that employers may seek an exemption from the Division of Labor Standards Enforcement from duty-free rest period requirements as provided in the pertinent Wage Orders.
In light of the Court’s ruling, employers should carefully evaluate their rest-break practices and policies. Employers should also evaluate their meal break practices and policies. Employees who fail to authorize and permit their non-exempt employees to take their rest breaks or meal breaks are subject to penalties for each day that their employees were denied off-duty and uninterrupted rest or meal breaks. Employers who are sued for failing to provide appropriate rest or meal breaks to their employees, including off-duty rest breaks, could face exposure to a significant judgment (the judgment against ABM was over $90 million), including penalties and interest.
A number of employment-related measures were passed in 2016. The measures became effective on January 1, 2017, unless otherwise specified. Employers will want to be aware of the effect, if any, of these new measures on their day-to-day operations. The highlights for the new employment-related measures follow:
California Fair Pay Act Amendments
The California Fair Pay Act significantly changed the approach employers should be taking when evaluating or developing their salary structures, and prohibits employers from paying members of one sex less than they pay to members of the opposite sex for substantially similar work when viewed as a composite of skill, effort, and responsibility, and when performed under similar working conditions. Exceptions exist for wage differentials based on a seniority system, merit system, a system of earnings by quantity or quality of production, or a bona fide factor other than sex (e.g., education, training, experience). SB 1063 and AB 1676 impose additional requirements for wage differentials among employees.
SB 1063:
SB 1063 expands the Fair Pay Act to race and ethnicity by prohibiting employers from paying members of one race or ethnicity less than they pay to members of the opposite race or ethnicity for substantially similar work. The various exceptions for wage differentials continue to apply, and the onus to prove an exception justifies the differential remains on the employer.
AB 1676:
AB 1676 expands the California Fair Pay Act by specifying that prior salary, by itself, cannot justify any disparity in compensation for employees of another sex, race, or ethnicity for substantially similar work.
Minimum Wage & Exempt Employee Salary
SB 3
SB 3 will gradually increase the California minimum wage to $15 per hour. It imposes six annual increases for employers based on the size of the employer, as follows:
Date of Increase
26 or more Employees
25 or fewer Employees
January 1, 2017
$10.50
January 1, 2018
$11
$10.50
January 1, 2019
$12
$11
January 1, 2020
$13
$12
January 1, 2021
$14
$13
January 1, 2022
$15
$14
January 1, 2023
$15
Employers should be aware of local minimum wage ordinances that may be more favorable than the state minimum wage during the increases. Employers will also need to post the new Minimum Wage Order (MW-2017) in the workplace.
The increased minimum wage affects the minimum annual salary for exempt employees (employees who are exempt from overtime). The exempt employee salary will increase to $43,680 in 2017 for employers with 26 or more employees, and remain the same for employers with 25 or fewer employees ($41,600).
Computer Software Employees
Certain computer software employees are exempt from overtime under California law when certain conditions are met, including the payment of a minimum hourly rate of pay or salary. The minimum hourly rate, monthly salary, and annual salary for computer software employees increased to $42.35, $7,352.62, and $88,231.36, respectively.
Licensed Physicians and Surgeons
Certain licensed physicians and surgeons are exempt from overtime under California law when certain conditions are met, including payment of a minimum hourly rate of pay. The minimum hourly rate of pay increased to $77.15.
SB 3- Sick Leave for In-Home Supportive Services Workers
The California Healthy Workplaces, Healthy Families Act of 2014 grants paid sick leave to most California employees. In-home supportive services workers were previously exempt from the sick leave law. SB 3 makes the law applicable to in-home supportive services workers, meaning they will also be entitled to paid sick leave beginning on or after July 1, 2018.
Federal Overtime Rule
Exempt employees must generally meet a duties test and a salary test in order to maintain their exempt status, meaning they are exempt from overtime. The Wage and Hour Division of the U.S Department of Labor issued a final rule more than doubling the federal minimum annual salary. The minimum salary under federal law would have jumped from $23,660 to $47,476, with automatic updates every 3 years, beginning on January 1, 2020. No change was made to the duties test under federal law. The regulation was set to take place on December 1, 2016. The regulation was enjoined by a federal court, and did not go into effect. That injunction has been appealed, and is currently pending.
SB 1015
California passed the Domestic Worker Bill of Rights in 2013, which regulates personal attendants and requires that overtime be paid to them for work in excess of 9 hours in any workday or 45 hours in any workweek. The Act was set to repeal as of January 1, 2017. SB 1015 deletes the repeal date and does not create a new repeal date, meaning that the Act will continue in effect for the foreseeable future.
Discrimination Regulation and Enforcement
AB 1732
Currently, California employers with single-user restrooms may label them for use by males or females. AB 1732 establishes new signage requirements for single-user restrooms, and requires that they be identified as “all-gender,” and not for use by only males or by females. The new signage requirement starts on March 1, 2017.
SB 1001
Federal law requires verification of an employee’s eligibility to work using the Form I-9 process. Asking for more or different documentation than is required by the Form I-9, refusal to accept documents that appear genuine on their face or to engage in other types of document abuse is prohibited. SB 1001 makes this conduct unlawful under California law, as well.
Leaves of Absence, Benefits, and Protections
AB 908
Employees are eligible for California wage replacement benefits provided by the Paid Family Leave and State Disability insurance programs for specific purposes, including caring for specified persons and bonding with a child. Currently an employee receives up to 55% of their base wages for up to 6 weeks. AB 908 will increase the amount of wage replacement benefits. Many low wage workers will see an increase to 70%, while higher wage earners will see an increase to 60%. AB 908 also eliminates the 7-day waiting period for family temporary disability benefits. The law takes effect January 1, 2018.
AB 1847
AB 1874 specifies that employers who are currently required to notify employees of their eligibility for the Federal Earned Income Tax Credit must also notify employees of their potential eligibility for the California Earned Income Tax Credit. California employers will need to provide updated notification forms to employees.
AB 2337
Existing California law permits employees who are victims of domestic violence, sexual assault and stalking to take time off for medical treatment or legal proceedings. AB 2337 requires employers to provide written notice to employees about those existing rights. The California Labor Commissioner is required to develop the notification form on or before July 1, 2017. The required form must be given to all new employees when hired and to current employees upon request. Employers are not required to comply with this notice requirement until the Commissioner makes the form available on its website.
AB 1843
California’s AB 1843 prohibits an employer from inquiring into an applicant’s juvenile conviction history. The bill also prohibits using those convictions as a factor in determining any condition of employment.
Employment Contracts & Workplace Policies
SB 1241
Employment contracts frequently designate venue (where employment disputes will be arbitrated or litigated) and choice of law (the law that will apply to the dispute). The venue may not be in California and the law chosen may not be California law. Under California’s SB 1241, employers will not be able to require employees who primarily work and reside in California to agree to non-California venue or choice of law provisions in new employment contracts or in preexisting employment contracts that are modified or extended after January 1. An exception exists when an employee is represented by an attorney in negotiating the venue and choice of law provisions in the employee’s employment contract.
2 CCR § 11023
The Fair Employment and Housing Act (FEHA), and its implementing regulations, constitute California’s discrimination, harassment and retaliation law. New regulations went into effect earlier this year on April 1, 2016. Among the new requirements, employers must now have harassment, discrimination and retaliation policies that meet certain criteria, including that the policy is in writing, lists each and every protected category under the FEHA, and provides a process for receiving and responding to complaints. Employers must disseminate the policy, and provide translated copies of the policy when 10% or more of their workforce speaks a language other than English.
Smoking
ABX2-5 & ABX2-7
California employers were prohibited from allowing a person to smoke tobacco products in an enclosed space in the workplace, subject to exceptions. ABX2-5 added electronic cigarettes and other vapor/electronic and oral smoking devices to the prohibition on smoking. ABX2-7 extends the smoking prohibition to owner-operated businesses, and eliminates many of the prior exemptions (e.g., hotel lobbies, bars and taverns, banquet rooms, warehouse facilities, and employee break rooms). The laws went into effect on June 9, 2016.
Proposition 64 – The Control, Regulate and Tax Adult Use of Marijuana Act
Proposition 64 legalizes recreational use of marijuana in California by individuals who are 21 years of age or older. Notwithstanding this new law, employers can still enact and enforce workplace policies concerning marijuana. The law does not require employers to permit or accommodate the use of marijuana in the workplace, or affect the ability of employers to have workplace policies prohibiting the use of marijuana. Portions of the law went into effect on November 9, 2016.
Cell Phones
AB 1785
Under existing California law, drivers could not use handheld wireless telephones or electronic wireless communications devices to text and drive unless they were configured to allow voice-operated or hands-free operation. AB 1785 now prohibits drivers from holding and operating wireless telephones or electronic wireless communications while driving. Drivers can only operate wireless telephones or electronic wireless communications while driving if they are mounted on the windshield, dashboard or center console, and the driver only needs to activate or deactivate them with a tap of the finger or a single swipe.
Employment contracts frequently designate the place where employment disputes will be arbitrated or litigated and the law that will apply. The place is not always California, and the law is not always California law, even when employees are working and residing in California. This is about to change with the enactment of Senate Bill 1241, which creates new protections for employees who primarily work and reside in California (hereafter “California employees”).
The SB 1241 protections will apply to new contracts entered into, and existing contracts that are modified or extended, on January 1, 2017 or later. Employers will not be able to require California employees to arbitrate or litigate an employment dispute arising in California outside of California. Additionally, employers will not be able to deprive employees of the protection of California law for disputes arising in California; for example, by including a provision in the employment contract requiring that another state’s law apply instead of California law. Provisions in contracts that violate these protections will not be automatically void. Rather, they will be voidable at the employee’s option. If voided, the employee can still have his or her employment dispute decided in California, applying California law, and may recover attorney’s fees for doing so.
Companies operating in multiple states, and in particular, companies that are headquartered outside of California, are the most likely to be affected by the new protections. The law contains a very limited exception, though. The new statutory protections will not apply when the employee is individually represented by an attorney for the negotiation of the employment contract. When employees are not represented by an attorney, employers should think twice before attempting to impose out-of-state law on California employees or requiring a California employee to adjudicate employment claims arising inside California outside of this State. California employees will have a strong incentive to void the provisions because adjudicating in California will be convenient for them, California law is generally very protective of them, and they may be able to recover attorney fees if they seek to void the provisions.
California employers – public and private – must promptly pay all earned and unpaid wages (i.e., “final wages”) to employees who are discharged or quit. When employers fire an employee, they must pay the final wages at the time the employee is fired. When an employee quits, final wages are due immediately when the employee provides 72 hours prior notice, or within 72 hours after a quit without notice. But what about employees who retire? A recent Supreme Court decision determined that those employees “quit,” and are entitled to final wages on the same timeline as other quitting employees.
In McLean v. State (Cal. 2016) 1 Cal.5th 615, McLean retired from her employment with the State of California and did not receive her final wages on the day of her retirement or 72 hours later. She sued on behalf of herself and a class of former State of California employees who retired and did not receive final wages within 72 hours of their retirement. The trial court determined that Mclean retired, but did not “quit,” and dismissed the claim. The court of appeals reversed, determining that prompt payment of final wages applied because McLean “quit[] to retire.” The Supreme Court agreed with the court of appeal, and affirmed its determination on the issue because a retiring employee stops, ceases, or leaves employment just like other employees who “quit.”
As is now clear, final wages are available to employees who are voluntarily or involuntarily separated from employment, whether they leave because of a discharge, quit or retirement. Just as the obligation to promptly pay final wages applies to employees who retire, so does the penalty for failure to promptly pay final wages. The penalty is that the employee’s wages will continue until the final wages are paid, up to a maximum of 30 calendar days. So, coordinate with payroll and make sure departing employees are paid on time.
Most employers know (or should know) that discrimination against transgender employees is prohibited in California. However, many employers are confused about the legal rights transgender employees have and how to protect those rights. Of particular focus in recent months is restroom access for transgender and gender non-conforming employees. Employers are facing this issue with increasing frequency. To guide employers through navigating employee restroom access, several state and federal agencies have issued guidance designed to answer many of the questions they currently face.
U.S. Department of Labor’s Occupational Safety and Health Administration (“OSHA”) Guidance
OSHA’s guidance indicates that employers should allow employees to use restrooms that correspond with their gender identity. All employees, including transgender employees, should determine the appropriate restroom facility for themselves, and should not be required to use segregated facilities (e.g., single-occupancy or unisex facilities).
U.S. Equal Employment Opportunity Commission (“EEOC”) Fact Sheet
The fact sheet provides that transgender employees are entitled to Title VII protections, and that denying employees equal access to a common restroom corresponding to the employee’s gender identity constitutes sex discrimination under the Civil Rights Act of 1964. Accordingly, the EEOC cautions employers to make sure they provide transgender workers access to a bathroom that corresponds to their gender identity.
California Department of Fair Employment and Housing (“DFEH”) Guidelines
The DFEH Guidelines instruct employers to provide transgender workers the right to use a restroom or locker room that corresponds to their gender identity and without regard for the workers’ assigned sex at birth. Because there is not a particular medical or legal event required for an employee to be transgender, employers may not require transgender employees to show any “proof” to be appropriately accommodated. The DFEH recommends that employers also consider providing single-occupancy restrooms that may be used by employees. However, employers choosing to do so must make clear that use of such restrooms is voluntary.
AB 1732
AB 1732 is on the horizon. This bill will require that all businesses and public buildings label their single-occupancy restrooms “all gender.” The California Assembly approved the bill on May 9, 2016 and it is now before the Senate. If passed, which seems likely, the bill will take effect on March 1, 2017.
The law in this area is continuously developing. California employers should be aware of the legal protections afforded to transgender and gender non-conforming employees, and:
Allow employees access to restrooms consistent with their gender identity.
If possible, a gender-neutral, single-occupancy restroom might be considered for voluntary use by employees, including transgender employees and coworkers who may be uncomfortable with a transgender employee’s use of a multiple-occupant restroom.
Use employee-preferred names and pronouns for employees, and enforce this usage among other employees.
Revise nondiscrimination and anti-harassment policies to include gender identity and gender expression, and consider transgender employment policies.
Where necessary, reexamine and revise gender-based dress codes.
Be aware of changes in local, state and federal laws protecting gender identity, gender expression, and transgender employees.
Federal and California laws challenge employers and employees with complex statutes and regulations that govern extended employee time off. All too often, leaves are not appropriately addressed, or addressed at all, depriving employees of rights and benefits they may be entitled to and exposing employers to liability. The intent of this article is to provide an overview of the laws impacting employee leaves, and a proactive, step-by-step approach to identifying and addressing leave situations.
Identify Potential Leave Situations
The first step is to identify if an employee may be out of work for an extended period of time. The employer should immediately commit to proactively addressing the situation. In most instances, the employer has an affirmative duty to discuss with the employee that they may be entitled to a statutory leave or determine if they are suffering from a disability. Waiting to see “how things work out” is a poor strategy.
Determine if a Leave is Appropriate
After recognizing that an employee desires or needs extended time off work, the next step is to determine which, if any, leaves may apply to the employee’s situation. Employers do not need more than a working knowledge of leave laws. Being proactive includes the commitment to get help, if necessary. Competent HR consultants and legal counsel can help.
Statutory Leaves
The federal Family Medical Leave Act (FMLA) and the California Family Rights Act (CFRA) provide up to 12 weeks of leave for employees to address their serious health conditions and to address specific family issues such as to care for a child, parent, spouse registered domestic partner, child of a registered domestic partner and the birth or adoption of a child, or the placement of a foster child. The FMLA and the CFRA apply only if (1) the employer has 50 or more employees and (2) the employee has been employed with that employer for at least 12 consecutive months and has worked at least 1,250 hours during the last 12 months.
California’s Pregnancy Disability Leave (PDL) applies to all employers, regardless of the number of employees. PDL is available for up to 4 months during a time an employee is unable to work or is unable to perform her essential job functions due to health issues related to pregnancy and childbirth. PDL may run currently with the FMLA, but does not run currently with the CFRA. Thus an employee who qualifies for CFRA is entitled to 12 weeks of CFRA leave in addition to any PDL.
Other statutory leaves include time off voluntary entry into a drug and rehabilitation program, attendance at adult literacy programs, and leave for participation in certain school activities (each requiring a minimum of 25 employees), as well as serving as an emergency fire fighter, reserve peace office or emergency rescue person.
Disability Leaves
Disability laws may need to be considered in leave situations that involve the employee’s physical and mental health. The Americans with Disabilities Act (ADA), which applies to employers with 15 or more employees, and the California Fair Employment and Housing Act (FEHA), which applies to employers with 5 employees or more, require an employer to provide “reasonable accommodations” to employees with physical and mental disabilities unless doing so would cause “undue hardship.” “Reasonable accommodations” may also include providing leave.
Communicate
Both employers and employees have duties to communicate with each other regarding leave. The sooner the communication process begins the better. Employers should advise employees of their legal rights. Employees should communicate with Employers regarding their needs and expectations regarding leave. Although employers are not entitled to specific medical information regarding the cause of a disability, they are entitled to a physician’s note to establish the nature and extent of the disability and that leave is a necessary and appropriate accommodation for a disability.
The Leave Plan
A common error that employers and employees make is they fail to define the terms of the leave in a plan. The plan may be very simple, merely providing when the employee is to return to work. If circumstances change, channels of communication should be reopened, the leave redefined and a new return to work date established. At all times there should be a written document (ideally signed by both the employer and employee, but at least a letter from the employer to the employee) establishing the return to work date.
Conclusions
Addressing leave requires a sequence of proactive steps by employers and employees that should affirmatively identify circumstances that could lead to an employment leave. Once identified, the nature of the potential leave should be investigated and the benefits, if any – including the right to return to work and the payment of benefits – determined. The employee handbook should always be reviewed as it may enhance the legally required benefits. The employer should assume the duty to advise an employee of his/her rights to leave under the circumstances. Further, the employer and the employee should communicate to determine the leave period, the return to work date and everything should be memorialized in a writing. The leave may change based upon changing circumstances, but there should always be a written return to work date. When in doubt, seek assistance. No matter what, be proactive. Take Action! – Don’t LEAVE it for later!
Employers do not have to pay overtime to executive, administrative and professional employees who qualify for exemption as exempt employees. Generally, exempt employees must meet both a duties test and a salary test under applicable law. The federal Fair Labor Standards Act (“FLSA”) currently has a lower salary test than California law, so California employers commonly follow the California salary test to determine if their employees will meet the salary test for exempt employees because compliance with the higher California salary requirement will comply with the salary requirement under the FLSA. However, the new federal overtime rule increases the minimum salary for exempt employees, and will soon be higher than the California minimum salary for exempt employees.
The new federal overtime rule does not change the federal duties test for exemption from overtime. It only affects the salary test. Beginning on December 1, 2016, the minimum annual salary for exempt employees under the FLSA will be $47,476, and will be adjusted automatically every three years beginning on January 1, 2020. Contrast this with the California minimum annual salary for exempt employees, which is currently $41,600. Even with California’s new State minimum wage law, California’s minimum annual salary for exempt employees is not anticipated to exceed the FLSA minimum annual salary until the State minimum wage increases to $12 per hour, which is not scheduled to occur until January 1, 2019 for employers with 26 or more employees (or January 1, 2020 for employers with 25 or fewer employees).
Employers will need to review the salaries of their exempt employees and determine whether they will meet the higher FLSA salary test for employees subject to it. For those that do not, employers will need to determine whether to increase their salaries in order to maintain their exempt status. Employers can continue to pay employees on a salary basis after December 1, even if that salary is less than $47,476, but employees with salaries below $47,476 will be nonexempt employees, and therefore, entitled to overtime. Alternatively, employers can pay formerly exempt, newly nonexempt employees on an hourly basis. Most California employers will need to pay hourly employees according to California’s minimum wage ($10 per hour, increasing to $10.50 per hour for employers with 26 or more employees on January 1, 2017), not the federal minimum wage ($7.25 per hour).
California employers have to post election notices advising employees of their ability to take time off to vote when employees do not have enough time to vote outside of their working hours. Election notices need to be posted 10 days before any statewide election.
This is the week for California employers to post their election notices since the California presidential primary election is June 7. Most employers should post the election notice by Friday, May 27, 2016. For more information about the election notice, watch our Video Blog:
On April 4, 2016, Governor Jerry Brown signed California Senate Bill 3 (“SB 3”), which will gradually raise the State minimum wage to $15 per hour. The State’s current minimum wage is $10 per hour.
SB 3 provides six annual increases to the current minimum wage for employers with 26 or more employees. Beginning on January 1, 2017, the minimum wage will increase to $10.50. In 2018, the minimum wage will increase to $11 and then increase by $1 each year until 2022, when the minimum wage will be $15. Employers with 25 or fewer employees will have an additional year to implement each of the increases. In other words, the State minimum wage will not begin to increase for these smaller employers until January 1, 2018.
The Governor may pause scheduled increases based on certain economic conditions. However, the Governor may only pause the scheduled increases a maximum of two times. Once the $15 wage has been reached, the Department of Finance will annually increase the minimum wage for the following year based on statistics from the U.S. Bureau of Labor Statistics.
Many employers will need to significantly adjust their compensation and benefits structures in light of the new law. Of course, the increased minimum wage will affect overtime and double-time. It will also affect exempt employee salaries because exempt employees under California law generally must earn a salary that is at least twice the State’s minimum wage for full-time employment. This means that under the current $10 per hour minimum wage, exempt employees must earn an annual salary of $41,600. Under the $15 per hour minimum wage, the minimum annual salary for exempt employees jumps to $62,400.
Finally, employers should bear in mind that cities and counties may have their own minimum wages that are higher than the State minimum wage (e.g., Berkeley, Emeryville, Los Angeles, Mountain View, Oakland, Palo Alto, Richmond, Sacramento, San Jose, San Francisco, Sunnyvale.) As a result, employers should determine whether another minimum wage applies, and pay their employees according to the higher applicable minimum wage.
*This is not legal advice. Please click here to review our Disclaimer.
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