New Minimum Wage in California
By VICKY BROWN
So, the new minimum wage is $16.50 per hour for all non-exempt employees. That means everyone – from your receptionist to your warehouse staff, your retail associates to your junior analysts. If they’re non-exempt, they need to be at $16.50 or above. Period.
Now, here’s where it gets tricky. You need to make absolutely sure this change is reflected in your payroll system for every single paycheck starting January 1, 2024. Not January 2nd, not the first pay period after January 1st. January 1st. That means, if the pay period starts the last week of December, and ends a week into January – you’ll have to math a bit. Because all the hours worked in December can be at the old rate (of course you could bump them up early if you wanted to); but any hour worked Jan 1st or later have to be at or above the new minimum wage rate.
Why am I being so adamant about this? Because, my friends, the state of California doesn’t mess around when it comes to wage and hour laws. They’re not going to give you a grace period or a pat on the back for trying your best. If you’re late, even by a day, you could be looking at penalties, back pay, and a whole host of legal headaches that, trust me, you do not want.
And let’s not forget about the ripple effect. If you’re bumping up your minimum wage workers to $16.50, what about the employees who were already making $16? Or $17? You might need to adjust their wages too to maintain your pay scale structure. It’s not just about compliance, it’s about fairness and morale too.
Let’s talk about your exempt employees – you know, those team members who are salaried and don’t get overtime – well their annual salary needs to hit at least $68,640. That’s not a random number I pulled out of thin air. It’s exactly twice the new minimum wage for full-time work. And again, the state isn’t playing around with this.
Oh, and did you hear that part about full time? That means, you can’t do some sort of pro ration calculation for someone that works part time. If they’re exempt – even if they only work 5 hrs in a week, they still need to clear the $1320 each week.
Now, you might be thinking, my exempt team members are already making good money. Well, I hate to tell you but “good money” and “legally compliant money” aren’t always the same thing. You need to go through your records with a fine-tooth comb and make sure every single exempt employee is hitting that $68,640 mark.
And if you find that you’ve got exempt employees making less, you’ve essentially got two choices. One, you can bump up their salary to meet the new threshold. Or two, you can reclassify them as non-exempt. And unfortunately, neither of these options is as simple as it sounds.
If you’re bumping up salaries, you need to consider the ripple effect. What about the employees already making $66,560 or slightly above? Again, you might need to adjust their salaries to maintain your pay scale structure.
And reclassifying? Well, that is a whole can of worms. You’re looking at changing how you track their time, how you calculate their pay, and potentially how you structure their job duties. Plus, employees often see being moved from exempt to non-exempt as a demotion, even if it comes with overtime eligibility. You’ll need to manage that perception carefully.
And unfortunately, if you don’t do this right, if you keep calling employees “exempt” when they don’t meet the salary threshold, you’re looking at potential misclassification claims. I’m talking about owing back overtime, penalties, and possibly facing a lawsuit. And all that is a headache you do not want.
So here’s my advice: start reviewing your exempt employee salaries now. Don’t wait until December 31st to figure this out. If you need to make changes, whether it’s raising salaries or reclassifying employees, you want to give yourself plenty of time to do it right. Communicate with your employees, update your systems, and make sure everything is in order well before January 1st rolls around.
And don’t forget those lovely notices and postings. The updated Minimum Wage Order needs to be displayed prominently where your employees can easily see it. So, no tucking it away in some corner of the break room behind the vending machine. Put it somewhere your team can’t miss it.
“… if you keep calling employees “exempt” when they don’t meet the salary threshold, you’re looking at potential misclassification claims. I’m talking about owing back overtime, penalties, and possibly facing a lawsuit. And all that is a headache you do not want.“
You also need to update your employee wage statements. That means every single paystub needs to reflect the new rates – once you update payroll, that should take care of it. But, don’t forget about those Wage Theft Prevention Notices. They need to be updated to.
Here’s a pro tip – if the only thing changing is the rate, then you don’t’ have to re-distribute the Wage Theft Notice to existing employees. But you do need to have the correct rate on the form the new hires.
So,, you feel like you have state compliance down pat. Well, California’s a big state, and different cities and counties often have their own minimum wage laws. And guess what? If your local minimum wage is higher than the state’s, you’ve got to go with the higher rate. So do your homework. Check what’s happening in your city, your county. Don’t assume that just because you’re following state law, you’re in the clear.
Now, on to those employee handbooks and written policies. When was the last time you actually read through yours? If you’re like most business owners, it’s probably been a while. Well, now’s the time. These may need to be updated to reflect the new minimum wage too. And while you’re in there, take a good hard look at your pay scales and wage structures. Do they still make sense with the new minimum wage? You might need to make some adjustments to keep things fair and competitive.
Lastly, let’s talk about your managers and supervisors. These folks they’re your front line. So they need to be thoroughly trained on all of this. I’m talking about the new rates, the new policies, how to handle questions from employees, the whole nine yards.
Whether you’re an entrepreneur jumping into a leadership role, a seasoned business pro with new HR responsibilities, or just starting your HR career – we’ve got the right path to guide you through your HR hurdles.
Check out the Leaders Journey Experience. This online education platform holds the LJE Masterclass, HR SimpleStart Academy and HR FuturePro Academy.
Not sure where to start – take the quiz!
And this training shouldn’t just be about rattling off new numbers. It’s about understanding the why behind the changes. Your managers need to be able to explain these updates to their teams in a way that makes sense. They need to be able to handle any pushback or confusion. Because let’s face it, changes to pay can be sensitive.
Remember, your managers are often the face of your company to your employees. If they’re fumbling through explanations or giving out wrong information, that reflects poorly on your whole organization. So invest the time in training them properly. It’ll pay off in a smoother implementation and happier team members.
So, to put a bow on it – in the end, all of these steps – the postings, the policy updates, the local research, the training – they’re all part of being a good leader. Because good leaders are responsible, and aw-abiding. So don’t take the chance and just try to fly under the radar.
Besides, as leaders, we set the tone for our organizations. If we’re not on top of these changes, how can we expect our teams to take them seriously? This isn’t just about avoiding fines or lawsuits – though those are certainly good reasons. It’s about showing our team that we value them and their work, and that we’re committed to following the law.
So, no excuses, no delays. Get those payroll systems updated, get your notices in order, make any necessary adjustments, and let’s start 2024 off on the right foot. Your employees – and your bottom line – will thank you for it.