California, known for its progressive approach to labor laws, takes center stage in setting the standard for fair and equitable employment practices. Boasting one of the highest state minimum wages in the United States, California continues to pave the way for workers’ rights and fair compensation. In fact, the California minimum wage, which reflects the state’s commitment to socioeconomic fairness, has been progressively increasing to address the evolving needs of its workforce.
So, what is the minimum wage in California? Does the CA minimum wage vary by industry? And what happens if the state minimum wage differs from federal and local minimum wage requirements?
From tiered minimum wage structures to specific industry standards and local nuances, this guide aims to empower employers with a thorough understanding of the regulations that shape employee compensation in California. Whether you’re a seasoned employer seeking a refresher or a business entering the Californian workforce for the first time, read on to find out everything you need to know about minimum wage laws in the Golden State.
- Minimum Wage Tiers
- California Minimum Wage: History
- Current Minimum Wage Rates in California
- Exemptions and Special Cases
- California Minimum Wage Compliance and Enforcement
- Additional California Wage Laws To Consider
- Effectively Manage California Minimum Wage with Factorial
- Centralize and Automate Your Payroll from Start to Finish 🚀
When it comes to determining how much you are legally required to pay your employees, there are three things to consider. This includes the federal minimum wage, your state’s minimum wage, and any local district or municipality minimum wages that might apply.
With this in mind, before we delve into the California state minimum wage, let’s explore these different tiers to see how each level of minimum wage contributes to the overall compensation framework for employees.
Federal Minimum Wage
Firstly, at the foundational level of the minimum wage structure is the federal minimum wage tier, governed by the Fair Labor Standards Act (FLSA). This tier establishes the baseline for minimum compensation, currently set at $7.25 per hour for untipped workers and $2.15 per hour for tipped workers.
As the national standard, this tier ensures a basic level of remuneration for employees across the United States. Employers subject to FLSA must pay this federal minimum wage as a minimum, providing a fundamental framework for fair compensation practices. It acts as a crucial starting point for wage considerations, influencing discussions on pay parity and labor standards on a broader scale. However, it is essential to recognize that this federal tier represents the minimum, and employers must also navigate state and local tiers that may prescribe higher rates to address regional economic variations.
State Minimum Wage
Secondly, and beyond the federal baseline, the state minimum wage tier adds a crucial layer to the employee compensation structure in the US. Each state has the authority to establish its own minimum wage, accounting for unique economic factors and the cost of living. This tier recognizes the diverse financial realities across the country, enabling states to tailor minimum wage rates to their specific needs.
Employers operating within a particular state must adhere to the state-established minimum wage. If a state mandates a rate higher than the federal standard, employers must pay the higher of the two. The state minimum wage reflects the dynamic nature of labor markets, allowing states to address regional economic disparities and enhance the well-being of their workforce through targeted wage regulations. Understanding and complying with state-specific minimum wage requirements are integral components of ethical and legal employment practices.
Local District or Municipality Minimum Wages
Finally, the local district or municipality minimum wage tier recognizes that places within states have different living costs. This tier lets certain districts or cities set their own minimum wage rules to match their unique financial situations. By doing so, it aims to address the unique economic challenges faced by communities, ensuring that employees are paid enough based on where they live. Employers operating in areas where local minimum wage laws apply must comply with these standards, even if local minimum wage standards are higher than state or federal rates.
This tier represents a targeted approach to wage regulation, allowing local authorities to respond directly to the economic needs of their communities. Staying updated on these specific standards is vital for employers, as it not only ensures compliance with the law but also fosters a fair and just working environment, acknowledging the distinct financial challenges faced by different communities.
California has been a pioneer in the fight for workers’ rights, and the state’s minimum wage laws reflect this commitment.
The first minimum wage law in Cali was introduced in 1913, setting the rate at $0.16 per hour. Over the years, the state has witnessed numerous amendments and adjustments to keep pace with inflation and the changing economic landscape.
Notably, California Governor Jerry Brown signed legislation in 2016 that charted a path for the state to achieve a $15 per hour minimum wage by 2022 for large businesses and 2023 for small businesses. This landmark decision marked a significant step in the fight against income inequality. It also positioned California as a leader in establishing a living wage for its workforce.
The history of the California minimum wage is characterized by a proactive approach to economic justice, with the state regularly reassessing and incrementally increasing the minimum wage to address the evolving needs of its diverse population. This commitment to fair compensation continues to shape California’s labor laws, setting a precedent for other regions to follow in the pursuit of equitable employment practices.
Along with a small number of other states including Washington and Massachusetts, California has one of the highest minimum wages in the United States. In fact, as of January 1, 2023, the minimum wage for most hourly employees in California is $15.00 per hour. This is considerably higher than the federal minimum wage of $7.25.
However, California’s minimum wage system is tiered, with different rates for employers based on the number of employees. This tiered structure is designed to help small businesses, which may have fewer financial resources to devote to labor costs. However, it is important to note that all California workers, regardless of employer size, have the right to earn a living wage. It’s also important for employers to be aware that these rates are subject to periodic California minimum wage increases.
As of 2023, the California minimum hourly wage tiered structure is as follows:
- 25 or fewer employees: $14.00 per hour
- More than 25 employees: $15.00 per hour
- Tipped employees: $10.00 per hour, plus tips to bring total hourly earnings to at least $15.00 per hour.
Industry-Specific California Minimum Wage Laws
There are also a number of industry-specific minimum wage laws in California. These laws are designed to ensure that workers in certain industries are paid a fair wage, even if their employer is small.
Here are some examples of industry-specific minimum wage laws in California:
- Fast food workers. Effective January 1, 2024 with the introduction of the California fast food bill, fast food workers in California will be entitled to earn at least $20 per hour. This is significantly higher than the general minimum wage of $15.00 per hour. The fast-food industry minimum wage will increase on an annual basis thereafter, up through 2029.
- Agricultural workers. Agricultural workers in California are paid a minimum wage of $15.00 per hour for the first eight hours worked each day and $18.00 per hour for any hours worked beyond eight hours in a day. This is higher than the minimum wage for agricultural workers in most other states.
- Hotel workers. Hotel workers in Los Angeles and San Francisco are entitled to earn a higher minimum wage. In Los Angeles, the hotel worker minimum wage is $16.04 per hour, and in San Francisco, it is $18.95 per hour.
- Security guards. Security guards in California are entitled to earn at least a higher minimum wage than the general minimum wage. The security guard minimum wage is $17.50 per hour.
These are just a few examples of industry-specific minimum wage laws in California. However, there are many other industries that have their own minimum wage laws, so it is important to check with the California Department of Labor Standards Enforcement (DLSE) to see if your industry is covered.
There are a number of exemptions to the California minimum wage laws that employers need to be aware of.
For example, some of the most common exemptions include:
- Executive, administrative, and professional employees. Salaried employees who meet the criteria for this classification are exempt from the minimum wage. These employees must typically have a high level of responsibility and autonomy in their jobs. They must also be paid a salary that is at least twice the minimum wage.
- Outside salespeople. Salespeople who spend more than half of their time working away from their employer’s place of business.
- Commissioned employees. Employees who earn most of their income from commissions. However, commissions must average at least $15.00 per hour.
- Learners, apprentices, and disabled workers. These types of workers can receive less than the general minimum wage, but only for a limited period of time. (However, starting in 2025, California will ban the practice of paying subminimum wages to individuals with intellectual or developmental disabilities.)
- Tipped employees. Tipped employees are paid a lower minimum wage than the general minimum wage. However, employers must make up the difference if tips do not bring total hourly earnings to at least $15.00 per hour.
- Employees of summer camps, charitable organizations and religious organizations. These employees are exempt if their employer pays at least the prevailing wage for similar work in the community.
In addition to these exemptions, there are also a number of special cases that apply to California’s minimum wage laws. For example, employees who work in certain cities and counties in California are paid a higher minimum wage. Examples include Los Angeles ($16.04 per hour) and San Francisco ($18.07 per hour). The minimum wage is higher in these cities because the cost of living is higher.
The California Department of Labor Standards Enforcement (DLSE) is responsible for enforcing the state’s minimum wage laws. Employers who violate California’s minimum wage laws may be required to pay back wages, interest, and liquidated damages to their employees. Additionally, employers who violate California minimum wage laws may be subject to civil penalties and criminal prosecution.
The DLSE enforces California’s minimum wage laws through a variety of methods, including:
- Investigations: The DLSE investigates complaints from employees who believe their employer is not paying them the correct minimum wage.
- Audits: The DLSE conducts audits of employers to ensure that they are complying with the state’s minimum wage laws.
- Education and outreach: The DLSE provides education and outreach to employers and employees about California’s minimum wage laws.
The best way to ensure compliance as an employer is to:
- Keep accurate records of all hours worked and wages paid to your employees.
- Review your payroll records regularly to ensure that you are paying your employees the correct minimum wage.
- Be aware of the different exemptions and special cases that apply to California minimum wage laws.
In addition to the above, there are a number of additional California wage laws that employers should be aware of.
These additional laws include:
- Overtime pay. Firstly, employers must offer overtime pay if an employee works more than eight hours per day or 40 hours per week. Overtime pay is 1.5 times the employee’s regular rate of pay.
- Meal and rest breaks. Secondly, employers must provide employees with meal and rest breaks. Employees must receive a 30-minute meal break for every five hours worked, and a 10-minute rest break for every four hours worked.
- Paid family leave. Thirdly, employers must provide employees with up to eight weeks of paid family leave per year. Employees must receive 60% of their regular wages during this time.
- Paid sick leave. Additionally, California law provides employees with up to 48 hours of paid sick leave per year. Employees must receive 100% of their regular wages during this time.
- Equal pay. Similar to the federal Equal Pay Act, California also has a state law that prohibits employers from paying employees different wages based on their sex, race, ethnicity, or other protected characteristics. This law applies to employers of all sizes, including public and private employers.
- Pay transparency. Finally, California has joined a number of other states by legislating new requirements that promote pay transparency in the workplace. The California Pay Transparency Law 2023 requires all companies in the state to share pay scale data with current employees and prospective candidates. The new employment law also establishes employer obligations relating to pay data reporting.
Managing payroll can be a complex and time-consuming task, especially for businesses that have to comply with the California minimum wage laws. Factorial’s cloud-based software can help businesses of all sizes effectively manage payroll and ensure California minimum wage compliance.
Features of Factorial’s payroll software that can help with this include:
- Automated payroll calculations. Factorial automatically calculates payroll taxes and deductions. This can help businesses save time and avoid costly mistakes.
- Payroll security. Factorial uses bank-level security to protect payroll data. This helps to ensure that payroll data is safe and secure.
- QuickBooks Factorial integration. Factorial integrates with QuickBooks, which makes it easy to sync payroll data. This can help businesses reduce manual data entry.
- Pay raises. Factorial makes it easy to process pay raises for employees. Businesses can simply enter the new pay rate and Factorial will automatically calculate the new payroll amounts.
- Pay periods. Factorial supports a variety of pay periods, including weekly, biweekly, and monthly. This makes it easy for businesses to choose the pay period that works best for them.
- Holiday pay. Factorial can automatically calculate holiday pay for employees. This can help businesses ensure they pay employees correctly for POT and California state holidays.
- On-demand pay. Factorial offers on-demand pay, which allows employees to access their earnings before their next pay period. This can be a valuable benefit for employees who need access to their earnings quickly.
- Payroll records and reporting. Factorial can help with payroll records and reporting by centralizing all payroll data in one place, automating payroll calculations, and generating comprehensive payroll reports.
Ultimately, Factorial can help you manage every aspect of your payroll system. That way, you can ensure compliance with California minimum wage laws and build a fair and equitable compensation structure that keeps your employees happy, motivated and productive.