California Minimum Wage Increases July 1, 2014

APPLIES TO

CA Employers and Employees

EFFECTIVE

July 1, 2014

QUESTIONS?

Contact HR On-Call

(888) 378-2456

The California minimum wage will increase to $9.00 per hour on July 1, 2014. This increase will impact exempt and non-exempt employees, commissioned inside salespersons, payroll processing, and may have a further financial impact upon the organization.

Non-Exempt Employees

All non-exempt employees who make less than $9.00 per hour must have their hourly rate of pay increased to $9.00 effective July 1, 2014. This also means an increase in the non-exempt employee’s overtime and double time rate of pay.

Non-exempt employees, whose rate of pay will increase effective July 1, 2014, must receive notice of this change under California Labor Code 2810.5. The change in wage notice must be provided to employees within seven calendar days of the minimum wage increase. A paycheck stub can suffice for this notification under California Labor Code 2810.5. However, in order to comply with the California Labor Code, this means that employees with a wage increase effective July 1 must receive a check stub by July 8,2014 which would include hours worked on July 1, 2014 at $9.00 per hour. If the payroll cycle will not comply with the seven day notification period, then the employer must issue a separate notice. It is suggested that employers use the Labor Department’s Notice to Employees (found here)  for this purpose.

 

Exempt Employees

Under the California Wage Orders all exempt employees must receive a monthly salary that is no less than two times the minimum wage. Therefore, effective July 1, 2014, the minimum salary an exempt employee must receive is $3,120 per month or $37,440 annual salary. Any exempt employee below the $3,120 per month or $37,440 annual salary must be increased to the new minimum exempt salary on July 1, 2014.

 

Commissioned Inside Salespersons

Under California Wage Orders 4 and 7 it is required that commissions must make up more than half the salesperson’s compensation and that employee must earn more than 1.5 times the minimum wage for all hours worked.   As such, to be exempt from overtime, commissioned salespersons will need to earn at least $13.50 per hour beginning July 1, 2014 for each hour worked during the pay period.

 

Payroll

Payroll calculations need to be reflected accordingly in order for the new hourly rate or salaried wage to be paid on July 1, 2014 regardless of the pay week or payroll cycle.  Based upon the employer’s established pay week, employees could be paid part of the pay week at a lower rate of pay and the remainder of the pay week at the new minimum wage.

 

The minimum wage increase may cause a broader financial impact to organizations operating in California.

The increase to minimum wage will have a financial effect on other areas of an organization.  For instance, an increase in workers’ compensation premiums, impact to the merit review process of employees who received a mandated (non-merit based) pay increase on July 1, possible morale issue if employees do not receive a merit increase in lieu of receiving a mandatory minimum wage increase, and an impact to the overall compensation plan as less tenured employees may now make the same wage as more tenured employees.

 

Action Items:

  1. Review compensation for exempt and non-exempt employees and make necessary changes to comply with the July 1, 2014 requirement.
  2. Download the Department of Labor’s Notice to Employees HERE.
  3. Issue notice to affected employees prior to July 1, 2014.
  4. For assistance in complying with the California minimum wage increase, contact HR On-Call at (888) 378-2456.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2014 ManagEase, Incorporated.

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