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Senate Bill 3 (“SB 3”) passed in 2016 detailed an increase of the state’s minimum wage over future years, providing smaller employers one additional year to reach the level of larger employers’ minimum wage rates.  On January 1, 2021, the state minimum wage will increase from $13.00 per hour to $14.00 per hour for all employers with 26 or more employees and from $12.00 per hour to $13.00 per hour for all employers with fewer than 26 employees.  

The minimum wage will increase for employers with 26 or more employees is as follows:

  • January 1, 2021 — $14.00 per hour
  • January 1, 2022 — $15.00 per hour

For employers with fewer than 26 employees, the minimum wage increases as follows:

  • January 1, 2021 — $13.00 per hour
  • January 1, 2022 — $14.00 per hour
  • January 1, 2023 — $15.00 per hour

After 2022/2023, the minimum wage will automatically increase by up to 3.5 percent based on the Consumer Price Index (“CPI”).  By August 1 of each year (after the scheduled increases above) the State Director of Finance will calculate an adjusted minimum wage to be effective the following January 1.  There are some provisions allowing the Governor to temporarily suspend the minimum wage increase scheduled for the following year. 

This increase also affects the minimum salary for exempt employees, who must earn at least two times the state minimum wage in order to meet the salary test for the white-collar exemption.  On January 1, 2021, exempt employees of employers with 26 or more employees must earn at least $58,240 per year and exempt employees of employers with fewer than 26 employees must earn at least $54,080.

ACTIONS RECOMMENDED AND REQUIRED:  Employers must ensure that all non-exempt (hourly) employees are paid the applicable minimum wage for their size of business.  Additionally, employers should review exempt (salary) employees’ pay to ensure it meets the salary test (at least two times state minimum wage) for their size of business by January 1, 2021.  Ensure that the applicable current minimum wage poster is displayed as required. 

A copy of SB 3 is available at: https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201520160SB3