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California Raises its Minimum Wage to $8.00 Per Hour

September 15, 2006

On September 12, 2006, California Governor Arnold Schwarzenegger approved legislation that will raise the state's minimum wage from $6.75 to $8.00 per hour, making it the highest state minimum wage in the nation. The governor signed Assembly Bill No. 1835, which increases the state's minimum wage to $7.50, effective January 1, 2007, and to $8.00, effective January 1, 2008.

The latest increase is the third time California has raised its minimum wage since 2001. That year, the state increased its minimum wage from $5.75 to $6.25. In 2002, the rate increased again to $6.75. The increase also comes just several months before elections will be held for governor and other statewide offices, and it coincides with federal mid-term congressional elections, at a time when Congress has been debating whether to raise the federal minimum wage, currently $5.15 per hour. That federal rate has remained unchanged since September 1, 1997.

The recent increase in California's minimum wage will impact numerous other wage rates and overtime-exempt classifications under state law, including:

Employees subject to the "white collar" overtime exemptions (i.e., executive, administrative, and professional) must be paid "no less than two times the state minimum wage for full-time employment." Cal. Labor Code §515(a). Under the new increase, employers must pay such employees, at a minimum, an annual salary of $31,200 in 2007, and $33,280 in 2008, to preserve their exempt status.
Employees covered by collective bargaining agreements who are overtime-exempt must be paid "not less than 30 percent more than the state minimum wage." Cal. Labor Code §514. Under the new increase, employers must pay such employees, at a minimum, $9.25 per hour in 2007, and $10.40 per hour in 2008, to preserve their exempt status.
Commissioned employees who are exempt from California's overtime requirement must be paid in excess of one and one-half the state's minimum wage. See Cal. Wage Order Nos. 4 and 7, § 3(D) in each. Under the new increase, employers must pay such employees more than $11.25 per hour in 2007, and more than $12.00 per hour in 2008, to preserve their exempt status.
"Learners," as defined by the California Wage Orders, must be paid "not less than 85 percent of the minimum wage rounded to the nearest nickel" for the first 160 hours. See Cal. Wage Order Nos. 1 through 15, see § 4(A) in each. Under the new increase, employers must pay such employees no less than $6.40 per hour in 2007, and no less than $6.80 per hour in 2008.
Employees who work split shifts must be paid one hour's pay "at the minimum wage" in addition to the minimum wage for that work day. Cal. Wage Order Nos. 1 through 15, see § 4(A) in each. Under the new increase, employers must pay such employees a total wage equal to at least the minimum wage plus $7.50 in 2007, and at least the minimum wage plus $8.00 in 2008.
An employee may be required to provide his own "tools or equipment," but only if they are customarily required by the trade or craft, and the employee is paid "at least two (2) times the minimum wage." See Cal. Wage Order Nos. 1 through 15, § 9(B) in each. Under the new increase, an employer may impose this requirement only if the employee is paid at least $15.00 per hour in 2007, and at least $16.00 per hour in 2008.

Beginning January 1, 2007, employers will be required to post written notice of the new rates in their facilities and, therefore, they should update their current work place posters. Updated work place postings should be available through the website of the California Department of Industrial Relations, at http://www.dir.ca.gov.

For more information about this article, please contact:

Linda S. Husar, Esq.
213.576.8017
lhusar@thelenreid.com

Richard E. Bromley, Esq.
213.576.8029
rebromley@thelenreid.com

Seth L. Neulight, Esq.
415.369.7219
sneulight@thelenreid.com

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©2006 Thelen LLP.This article has been published as an information service to clients and friends of Thelen. Please recognize that the information is general in nature and must not be relied upon as legal advice. We would be pleased to discuss this information with you and its application to your specific situation, and welcome your comments and suggestions.

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