1. State Minimum Wage Increase
As of January 1, 2022, the California minimum wage has increased. Almost all California employees must be paid a minimum wage of no less than $14 per hour for small employers with up to 25 employees. If an employer has 26 employees or more, the minimum wage has increased to $15 per hour. Some exceptions apply, including for family members of the employer. This minimum wage is just about double the federal minimum wage of $7.25 per hour.
2. Minimum Salary Increase
The minimum wage increase affects more than just wage earners. As a result of the minimum wage increasing, the salary required for an exempt worker has also increased.
Exempt employees, sometimes referred to as salaried employees, are employees classified as meeting a professional, administrative, or executive exemption. These workers are exempt from California’s wage and hour laws as long as they perform the duties required by the applicable exemption and if the salary basis test is met. The salary basis test for an exempt employee requires that the employer pays the nominally exempt employee a minimum salary equivalent to twice the state minimum wage based on a 40-hour workweek. This means that as of January 1, 2022, the minimum weekly salary of an exempt employee at an employer with at least 26 employees is $1,200 (2 x $15/hour x 40 hours). If the employer fails to meet the salary basis test, the employee is not properly classified as an exempt worker, but should be treated as a non-exempt worker, and is therefore entitled to their hourly wage and overtime, as earned.
3. California Cities and Counties
Certain local municipalities in California have even higher minimum wages than that mandated by the State of California. For instance, the minimum wage in San Francisco is $16.32 per hour. Employers who employ workers remotely in different jurisdictions (and even different cities in the same county or state) need to be particularly agile in monitoring compensation. These employers should take the time to ensure that employee compensation is in compliance with all applicable laws.
4. What If the Employer Has Underpaid?
Many employers and employees are unaware of increases in the minimum wage. If an employee discovers or learns that they have been underpaid, they should visit the local agencies in their area, or reach out to a professional.
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