The Minimum wage in most places is set either by the state government or, if the state government has not set a minimum wage rate, the federal minimum wage applies. In 2020, the federal minimum wage rate is $7.25 an hour. In California, a state-level minimum wage law came into effect on January 1, 2020. This law requires a different minimum wage rate depending on the size of the business: employers with 26 or more employees must pay $13 an hour or above, while employers of 25 or fewer employees must pay at least $12 an hour.
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The rate is determined by the size
This minimum wage law was put into place starting in 2017, requiring a minimum wage increase starting in 2017. The goal was a statewide minimum wage rate of $15 an hour by 2023. It became $10 an hour for small employers and $10.50 an hour for larger employers in January of 2017, then rose to $10.50 and $11.00 an hour, respectively, in 2018.
The future looks bright for employees
In 2019, the minimum wage rate was 11 per hour for employers with 25 employees or fewer and 12 per hour for employers with 26 or more employees, then in 2020 it cost 12 per hour for employers with 25 employees or fewer and 13 per hour for employers with 26 or more employees.
2021 can’t come soon enough
Starting January 1, 2021, the minimum wage rates will increase again to $13 and $14 an hour. Beginning January 1, 2022, employers with 26 or more employees will reach the desired $15 an hour minimum, while smaller employers with 25 or fewer employees will be required to pay that amount starting in January of 2023.
Employers have an incentive to hire first-time employees
There are a few exceptions to this minimum wage law. The first is for new learners of occupation; they can be paid 85% of the minimum wage during their first 160 hours if they have no previous experience. This applies regardless of age. Another exception exists for disabled workers and for employers who hire such workers. To pay less than the minimum wage to a disabled worker, however, a special license must be obtained from the state.
Los Angeles is paving the way
However, the minimum wage situation in Los Angeles County is more complicated than even the state law implies. The rate of the annual pay increases is faster in the city of Los Angeles, Los Angeles County (which includes unincorporated areas), and some other nearby cities such as Santa Monica, Pasadena, and Malibu. As a result, employers in those areas with 26 or more employees must pay a wage of at least $15 an hour starting in July of 2020, and smaller employers with 25 or fewer employees must pay a wage of at least $14.25 an hour. Those smaller employers with 25 employees or less have until July 1 of 2021 to comply with the $15 an hour minimum wage requirement.
California is not shy about minimum wage increases
This change doesn’t just affect hourly employees in places like Los Angeles. In the state of California, salaried overtime-exempt employees must be paid at least two times the minimum wage. This, however, is tied to the state minimum wage, not the local one.
Protection for salary employees
Therefore, in 2020, salaried employees in the city of Los Angeles (and elsewhere in the state) must be paid at least $1,040 per week if their employer has at least 26 employees, or at least $960 per week for employers of 25 or fewer employees. This is calculated by multiplying the state minimum wage by two, then multiplying this number by 2,080 hours worked in a year. Since this is tied to the state minimum wage rates, it will continue to increase with hourly wages until 2023.
Important to know if you are in sales
Commissioned salespeople have different requirements as well. A commissioned salesperson is exempted from overtime laws only if at least half of their earnings come from commissions and if their hourly rate works out to at least 1.5 times that of the state minimum. Therefore, to be considered an exempt employee, a commissioned salesperson needs to be earning a minimum wage of at least $19.50 per hour at a larger employer or a minimum wage of $18 an hour at a smaller employer, as of January 1, 2020.
Increases up and down California
The city of Los Angeles is not the only municipality in California raising its minimum wages faster and higher than the state requires. In Mountain View, as of January 1, 2020, the minimum wage increased to $16.05 per hour, regardless of the size of the business and Palo Alto raised theirs to $15.40 per hour. San Francisco, Milpitas, Berkeley, and Emeryville have decided that their minimum wage requirements will be determined by the Consumer Price Index.
Minimum wage laws in Los Angeles County and throughout California are more complicated than simply stating a number. Employers and employees alike need to be monitoring current laws and their paychecks to ensure that employees are being paid wages that comply with the law.