Navigating California’s 2024 Minimum Wage Hike as an Employer

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As a California employer, navigating the labyrinth of labor laws can be complex, especially with the state’s minimum wage. In 2024, California will experience another increase in its minimum wage up to $16.00 per hour, a change that could significantly impact your business operations. Understanding these changes is not just important—it’s critical. A thorough comprehension of the evolving wage landscape will allow you to make informed decisions, ensure compliance with the law, and maintain a sustainable business model.

California’s 2024 Minimum Wage Increase

As of 2023, California’s minimum wage currently stands at $15.50 per hour for all employers, with some cities and counties adopting a higher minimum wage. This rate is not static and is subject to changes as dictated by the state’s labor laws.

Come January 1, 2024, employers across the Golden State will need to adjust their payrolls once again as the state’s minimum wage will increase to $16.00 per hour. This adjustment marks a significant milestone in the state’s ongoing efforts to provide fair wages to its workforce.

The decision to raise the minimum wage is rooted in legislation passed by the California legislature. The intent behind these increases is to ensure that workers earn a living wage that keeps pace with the cost of living in one of the nation’s most expensive states. It’s part of a broader commitment to economic justice and reducing income inequality.

Looking ahead, it’s unclear whether and when the state will increase the minimum wage again. In November 2024, voters will consider a proposition that would raise the state’s minimum wage to $18.00 per hour in 2025 for larger employers and in 2026 for small employers. Given the state’s history and commitment to ensuring fair wages, it would not be surprising if additional increases are on the horizon.

For tipped workers, California does not permit the use of tip credits. Tip credits are a practice in some states that allows employers to count a portion of their employees’ tips towards the minimum wage requirement. In effect, the employer keeps that portion of the tip. But in California, employees must be paid at least the full state minimum wage before tips. The impact of this policy is significant—it ensures that tipped employees in California, such as restaurant servers or bartenders, are guaranteed the same minimum wage as non-tipped employees, providing a more stable income base despite the often unpredictable nature of tips.

Minimum Wage by City and Municipality

While California sets the baseline for minimum wage, it’s noteworthy that several cities and municipalities have taken it upon themselves to set higher rates. These localities have recognized the unique economic conditions within their borders and adjusted their minimum wages accordingly.

Here is a complete list of all cities and municipalities in California that have a minimum wage higher than the state. Please note that some of these wages will not change in 2024, or if they are changing, no announcement has been made by the time of publication of this article.

Location2023 Minimum Wage2024 Minimum Wage
Alameda$16.52No announcement
Berkeley$18.07No announcement
Cupertino$17.20No announcement
Daly City$16.07No announcement
East Palo Alto$16.50$17.10
El Cerrito$17.35$17.92
Emeryville$18.67No announcement
Foster City$16.50No announcement
Fremont$16.80No announcement
Half Moon Bay$16.45No announcement
Los Altos$17.20No announcement
Los Angeles (City)$16.78No announcement
Los Angeles County (unincorporated)$16.90No announcement
Malibu$16.90No announcement
Menlo Park$16.20$16.70
Milpitas$17.20No announcement
Mountain View$18.15$18.75
Palo Alto$17.25$17.80
Pasadena$16.93No announcement
Redwood City$17.00$17.70
Richmond$16.17No announcement
San Carlos$16.32$16.87
San Diego$16.30$16.85
San Francisco$18.07No announcement
San Jose$17.00$17.55
San Mateo$16.75$17.35
San Mateo County (unincorporated)$16.50$17.06
Santa Clara$17.20$17.75
Santa Monica$16.90No announcement
Santa Rosa$17.06$17.45
Sonoma$17.00No announcement
South San Francisco$16.70No announcement
West Hollywood$19.08No announcement

This patchwork of wage rates can be confusing for employers, particularly those operating in multiple localities. As a rule of thumb, employers must always pay the highest applicable minimum wage, whether it’s the federal, state, or local rate. Therefore, if a city or county has a higher minimum wage than the state, employers operating in that locality must abide by the local rate.

The rationale behind these differing rates across the state is largely tied to cost-of-living variances. Cities like San Francisco and Los Angeles are known for their high living costs, hence the justification for higher minimum wages. The goal is to ensure that workers in these areas can afford basic necessities such as housing, food, and healthcare.

However, these higher wages can also put pressure on local businesses, especially small ones, as they strive to balance fair pay with sustainable operations. It’s a delicate balancing act that continues to shape discussions around minimum wage laws in California.

Salary Threshold for Exempt Employees

Exempt employees are those who are exempt from certain provisions of the Fair Labor Standards Act (FLSA) and California Labor Code, particularly those related to overtime pay and meal and rest breaks. To qualify as exempt, an employee must generally meet specific criteria regarding their job duties and be paid above a specific salary threshold.

As of 2023, in California, the salary threshold for exempt employees is $64,480. This means that to qualify as an exempt employee, an individual must earn at least this amount annually and meet the applicable duties test.

However, come January 1, 2024, this threshold will increase to $66,560. This increase in the salary threshold for exempt employees has significant implications for employers. It means that some employees who were previously classified as exempt may no longer meet the salary criterion for exemption in 2024. If that’s the case, employers may need to reclassify these employees as non-exempt, which would make them eligible for overtime pay, meal periods, rest breaks, and other protections under the Labor Code. Alternatively, employers could choose to raise the salaries of these employees to meet the new threshold, maintaining their exempt status.

Impact on Employers and Remote Workers

The increase in California’s minimum wage has notable implications for all employers, including those employing remote workers within the state. For businesses, higher wages can mean increased labor costs, which could impact profitability. Employers may need to reassess their budgets, potentially adjusting pricing strategies or reallocating resources to accommodate these changes.

Specifically for employers with remote workers in California, it’s crucial to understand that these employees are still protected by California’s labor laws, including its minimum wage laws. This means that even if your business is not physically located in California, but you have remote hourly employees working in the state, they must be paid at least the applicable California minimum wage.

When determining which minimum wage laws to follow, the rule is to apply the highest rate that applies to the employee. So, if a municipality in California where your remote worker resides has a higher minimum wage than the state, you would need to pay at least that local rate.

California’s labor laws are often more protective than federal laws, so non-California-based employers with remote workers in the state must adhere to these standards. This includes not only minimum wage laws but also overtime, meal and rest breaks, and leave entitlements, among others.

Preparing for the minimum wage increase requires strategic planning and proactive measures. Here are some strategies employers can adopt to effectively manage these changes:

  1. Budget Review: Reassess your current budget to accommodate increased labor costs. This may involve adjusting pricing strategies, reducing non-essential expenses, or even exploring automation options for certain tasks.
  2. Workforce Planning: Consider the potential need for reclassification of employees who no longer meet the salary threshold for exempt status. If raising salaries is not feasible, prepare to manage increased overtime costs for newly non-exempt workers.
  3. Policy Updates: Ensure your company policies reflect the new wage rates and that these are communicated clearly to all employees. This includes remote workers who are also covered by California’s labor laws.
  4. Legal Consultation: Engage a labor law expert to help navigate these changes. They can provide tailored advice to ensure your business remains compliant while minimizing disruption to operations.

Failing to implement these changes correctly can result in significant penalties. Taking proactive steps now can help mitigate potential impacts on your business operations.

Navigating the Wage Waters: Final Thoughts

Understanding California’s minimum wage laws, including the rising salary thresholds for exempt employees and the impact on remote workers, is crucial for all employers. As these changes loom, proactive management and strategic planning are your best defense. Stay informed, reassess your policies, and consider seeking legal guidance to navigate these waters smoothly.

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Alex Wheeler - PARRIS Law Firm Attorney Speaking with a Client - Legal Consultation

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