California employers will need to review and confirm their employees’ exempt status and non-exempt hourly wage rates before the start of the new year because of an unusual change in the statewide minimum wage applicable to all California employees.
On July 27, 2022, the California Director of the Finance Department sent a letter to Governor Gavin Newsom stating that the minimum wage will be raised by $15.50 for all employers, regardless of headcount, on January 1, 2023. This change may take employers by surprise because the new minimum is higher than the scheduled increases published by the California Department of Industrial Relations, and applies regardless of employer size.
Most California employers are likely familiar with the Schedule for the California Minimum Wage rate 2017-2023 (see below) published on the California Department of Industrial Relations website.
However, this schedule is no longer accurate. A little-known provision of the California Labor Code (Cal. Lab. Code Section 1182.12) requires the Director of the Department of Finance to determine, each year, whether the minimum wage must be adjusted because of inflation. The mechanism takes into account the latest Consumer Price Index as set by the Bureau of Labor statistics. When inflation exceeds 7%, the minimum wage becomes the same for all employers, regardless of headcount, effective the following January 1. After determining that the US States Consumer Price Index for Urban Wage Earners and Clerical...
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