As January rolls around each year, there is talk of minimum wage increases across the country. There are differences between federal and state minimum wage requirements. Recently, cities have started enacting minimum wage requirements as well. Knowing what applies to you as a business owner will help you make sure you are paying your employees correctly and help you stay out of trouble and keep your employees happy.
Federal Minimum Wage
The federal minimum wage is historically lower than the minimum wage of California. Both continue to increase as they attempt to keep up with the cost of living. As of January 1, 2020, the federal minimum wage is set at $7.25 per hour and there are 29 states with higher requirements.
State Minimum Wage
California has historically had a minimum wage that is higher than the federal level and in California, employees are entitled to the higher of the two. This means that the federal minimum wage level is rarely relevant in California. The state recently passed a new minimum wage law that takes the minimum wage to $15 per hour over the course of five years. It is tiered with larger employers having to pay higher wages sooner than smaller employers. As of January 1, 2020, the minimum wage rate for employers with more than 26 employees is $13 per hour and $12 per hour for those with 26 or fewer employees.
Which Minimum Wage Laws Apply To You?
All of the laws are applicable to you as a business owner but the law that you need to abide by is the strictest standard (the general rule of thumb is to follow the law that is most beneficial for the employee). For example, California’s minimum wage is higher than the federal minimum wage, so you have to abide by the California minimum wage rate. If a city in California, like San Francisco for example, decides to make their minimum wage $15 per, then employers in the city limits of San Francisco would have to pay their employees $15 per hour.
Minimum Wages For 2019 Listed By State
|Passed in 2012
San Francisco, CA $12.25
San Jose, CA $10.30
Passed in 2014
Mountain View, CA $10.30
Sunnyvale, CA $10.30
San Diego, CA $11.50 (by 2017)*
Oakland, CA $12.25
Berkeley, CA $12.53 (by 2016)
Richmond, CA $13.00 (by 2018)
San Francisco, CA $15.00 (by 2018)
*San Diego increase awaits review by votes in 2016
|Passed in 2015
Emeryville, CA $15.00 (by 2018)
Los Angeles, CA $15.00 (by 2020)
Palo Alto, CA $11.00 (by 2016)
Los Angeles County, CA $15.00 (by 2020-21)
Mountain View, CA $15.00 (by 2018)
Sacramento, CA $12.50 (by 2020)
Current Proposals and Proposed Rate
Davis, CA $15.00
Sacramento, CA $15.00
Pasadena, CA $15.00
Palo Alto, CA $15.00 (by 2018)
Long Beach, CA $16.00
Sunnyvale, CA $15.00 (by 2018)
To see a full list go to http://www.nelp.org/content/uploads/City-Minimum-Wage-Laws-Recent-Trends-Economic-Evidence.pdf
Which Minimum Wage Do You Pay?
In January 2020, the minimum wage in California went up to $13.00 per hour for employers with more than 26 employees and $12 per hour for employers with less than 26 employees. The Federal minimum wage has stayed at $7.25 per hour since July of 2009. However, there are multiple cities in California that have even higher minimum wage rates.
Exceptions For Minimum Wage
A common question employers ask is, “Can I pay my employee less than minimum wage if they are okay with it?” The answer is no. You cannot legally pay any of your employees less than the strictest minimum wage requirement associated with your city, state and federal regulations. Make sure you know whether or not your city has a higher minimum wage than the state or federal requirement. It’s not common but is becoming more common, especially in larger cities in California.
There are some exceptions to the minimum wage law for non-profits, learners, and families working for immediate family and disabled persons. To see a full description of these exceptions go here: http://www.dir.ca.gov/dlse/faq_minimumwage.htm
It’s important for your business to act legally and professionally. Do the research to find out what your city, state and federal minimum wage requirements are and adhere to the strictest one.
Federal law defines a tipped employee as anyone involved in a job that “customarily and regularly receives more than $30 a month in tips”. This definition includes restaurant servers and other food service workers. Tipped employees are entitled to the minimum wage but must also claim their tips as taxable income.
What Happens When The Two Rules Conflict?
Generally speaking, when there are two minimum wage orders that conflict with each other, you must follow the one that results in the most pay for the employee. For example, in the case of California minimum wage versus the federal minimum wage, California employers must follow the state laws since that results in higher pay for the employee.
Remember That It Is The Employer’s Responsibility to Remain Compliant
Employers who do not follow the minimum wage laws can be subject to back pay and penalties. There are some employees who may be exempt from minimum wage or some that fall under federal requirements even though they live and work in California. Because the penalties for not complying are so steep, it is critical that you are aware of all the different rules and know which ones apply to your business.