Due to a cost-of-living increase required by the State’s minimum wage law, effective January 1, 2023, California’s minimum wage will increase from $15.00 to $15.50 per hour for all employers, regardless of their number of employees.

California Labor Code section 1182.12 requires minimum wage to be increased by at least 3.5 percent, rounded to the nearest 10 cents, if the State’s rate of inflation exceeds 7 percent.  The California Department of Finance is responsible for determining the rate of inflation, and recently announced the rate of inflation increased to 7.9 percent, thus triggering the increase in minimum wage.

California’s current minimum wage law was passed in 2016 and implemented a tier-based increase in the State’s minimum wage until it reached $15.00 per hour.  Currently, the law requires that employers with 25 or fewer employees pay $14.00 per hour, whereas employers with 26 or more employees pay $15.00 per hour.  The upcoming increase in minimum wage will affect all employers, regardless of their number of employees.   Employers must also be mindful of any local minimum wage ordinances that may apply to their workforce and that require a minimum wage higher than the State’s minimum wage. 

The increase of the minimum wage also impacts the minimum salary requirement for all exempt employees.  California law provides exemptions from minimum wage and overtime requirements for employees employed as bona fide executive, administrative, and professional employees.  To qualify for this exemption, one of the requirements is that the exempt employee is paid at least twice the minimum wage.  The minimum salary threshold is tied to the State minimum wage, not applicable local minimum wage ordinances, so as of January 1, 2023, the minimum salary for an exempt employee will increase to $64,480.00.

Employers should prepare for the upcoming wage increase for their employees and the potential impact it may have on their business operations.  If employers have questions concerning wage related issues they may contact the authors or their normal trusted counsel.