Employers: How to Cope with California’s Minimum Wage Laws for 2021

A new year means that California employers face mandatory updates to the state’s minimum wage rules. As of January 1, 2021, the minimum wage is now either $13 or $14 per hour depending on the number of people you employ in your business. This is part of the California government’s overall scheme to eventually increase the minimum wage across-the-board to $15 per hour by January 2023. Recent news from the White House indicates the $15 minimum may be imposed across the nation, as a federal mandate.

Specifically, for California employers in 2021, if you have 26 or more employees, you must pay your non-exempt hourly employees at least $14 per hour. If you have 25 or fewer employees, then you only have to pay them $13 per hour. Note this is significantly higher than the current federal minimum wage, which has remained at $7.25 per hour for many years. And there are some California cities that have adopted their own minimum wages that are higher than even the statewide minimums. In any event, when it comes to the minimum wage applicable to state employees, the strictest, i.e., the highest applicable wage, is the one to follow.

Changes to Minimum Salary Requirements for Exempt Employees

Concurrent with changes to the minimum wage, California has also increased the minimum salaries necessary to avoid paying an employee overtime. For employers with 25 or fewer employees, an exempt employee must make at least $1,040 per week (or $54,080 per year). Businesses with 26 or more employees must make at least $1,120 per week (or $58,240 per year).

Some Tips for Dealing with the State’s Increases

While the annual increase in California’s minimum wage and minimum salary requirements was hardly unexpected, it can still present significant difficulties for businesses struggling to adapt, especially in the current economic climate. With that in mind, here are a few tips on how employers can deal with the situation, as well as some tips on how to avoid potential legal problems.

1. You may want to convert certain exempt employees to non-exempt status. This is common when an employer cannot sustain the minimum salary requirement for an exempt employee within the company’s current budget. By converting the employee to non-exempt and restricting their overtime, you can reduce costs while still fairly compensating the employee.
2. On the other end of the spectrum, you may want to convert a non-exempt employee to exempt status in order to curtail their overtime pay. You need to tread carefully here. Simply paying an employee the minimum salary does not mean they are exempt. Only certain types of workers are subject to exemptions from overtime and can lawfully be salaried under applicable Industrial Welfare Commission (IWC) Wage Orders and regulations. The most common examples are workers in executive, administrative, or professional jobs who meet all IWC criteria in their job duties, as well as the amount of their salary.
3. If you are relying primarily on remote workers right now, it is a good idea to review their exempt status and determine whether they should still be considered exempt employees, should be converted to non-exempt, or even reclassified as independent contractors (another classification to approach with extreme caution).

One thing you should never do is guess about a worker’s legal status or make arbitrary decisions regarding potential re-classification. Instead, you need to work with an experienced Riverside County & Coachella employment lawyer for employers who can provide you with competent legal advice in this area. Contact the Law Office of Karen J. Sloat today.