California’s Minimum Wage Increase

In the wake of several recent changes to California’s employment landscape, Governor Brown signed Senate Bill No. 3 (“SB3”) into law on April 4, 2016, making it California’s latest mandated increase in minimum wage. This new law incrementally increases the state-wide minimum wage to $15 per hour by the year 2022. SB3 amends California Labor Code Section 1182.12 which recently raised California’s minimum wage to $10.00 per hour for 2016.

Currently, California’s minimum wage is already one of the highest in the nation, with many of its cities implementing even higher minimum wages throughout the state. Now under SB3, California’s minimum wage is set to increase incrementally each year, beginning in 2017. SB3, however, does allow for a delayed schedule for businesses with 25 employees or less, giving these employers an additional year to comply with each annual increase.

For businesses with 26 or more employees, the minimum wage increase will be as follows:

  • Beginning January 1, 2017 – $10.50
  • Beginning January 1, 2018 – $11.00
  • Beginning January 1, 2019 – $12.00
  • Beginning January 1, 2020 – $13.00
  • Beginning January 1, 2021 – $14.00
  • Beginning January 1, 2022 – $15.00

*(For businesses with 25 employees or fewer, the complete schedule is delayed by one year.)

After the minimum wage has been increased to $15 for all employers by 2023, SB3 also allows for the minimum wage to be increased each year thereafter at a rate tied to inflation. If, however, the annual rate of inflation increases beyond a predetermined percent prior to the first scheduled incremental increase, SB3 allows for an acceleration of the incremental increases for all employers, including those with 25 or fewer employees.

SB3 also provides, in part, that “to ensure economic conditions can support a minimum wage increase” certain thresholds must be met. Each year, beginning in 2018 and until the minimum wage reaches $15, each wage increase must be justified by the Director of Finance, certifying to the Governor that the economic condition of the state will support the next scheduled increase.

To justify the wage increase each year, conditions relating to unemployment, tax revenue, and the fiscal condition of the state’s General Fund must be met. If these economic conditions do not support the next scheduled wage increase, the Governor may temporarily suspend the minimum wage increase for the following year, delaying the entire schedule by one year. While there is no limit on the amount of times the Governor may delay the scheduled increases for reasons related to unemployment and tax revenue, SB3 does limit the amount of times the scheduled increases can be delayed due to the fiscal condition the state’s General Fund to “no more than two times.”

So, while SB3 provides a seemingly straight forward minimum wage schedule, the future minimum wage requirements for all employers are not set in stone as SB3 also provides for potential accelerations, delays, and adjustments.  To ensure you are up to date on your company’s minimum wage requirements and other important employment and labor related matters, visit our website at www.pkwhlaw.com or reach out to one of our attorneys.