COMP NEWS – Rising inflation is disrupting California’s timeline for gradual minimum wage increases, according to the Director of California’s Department of Finance. To counteract adverse economic effects, the Department of Finance is recommending more rapid minimum wage adjustments in the coming years.
On July 27, 2022, the Director of California’s Department of Finance sent a letter to Governor Gavin Newsom and other state officials, noting that the Department had determined poor economic conditions necessitated expedited increases to the minimum wage. Due to changes in the consumer price index (CPI) from July 1, 2021 through June 30, 2022, the state’s minimum wage law requires the state to bring forward by one calendar year – from 2024 to 2023 – the date when it must annually adjust the minimum wage rate. Rather than, as expected, a $15-per-hour minimum wage being applied to employers of all sizes in 2023, the minimum wage will instead increase to $15.50 per hour for all employers, on January 1, 2023. The minimum wage law requires the rate adjustment to be the lower of 3.5% or the rate of inflation – 7.9% during the relevant period – and 3.5% of $15 is 50 cents.
Changes to the minimum wage could affect a wide variety of related wage laws in the state. For instance, employers must provide tools required for performing job roles to hourly workers unless that worker’s wage is twice the state’s minimum wage.
The change to the minimum wage rate will affect more than just employees currently paid at or near the state minimum wage. It will also affect whether employees will (continue to) qualify to be exempt from state minimum wage and/or overtime requirements, the dollar amount of a sub-minimum wage an employer might be able to pay certain employees, whether various state laws apply to or exclude employees who are paid a specific percentage more than the state minimum wage, etc.1
To read more about California’s minimum wage requirements and subsequent laws, click here.
For more Comp News, see our recent posts.
Comp News is brought to you by CompXL, the flexible compensation software provider that enables mid- to large-size organizations to implement competitive pay structures such as merit-based bonuses and long-term awards.
