California Minimum Wages 2021

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Minimum wages

California is nationally known for having some of the most progressive laws in the country. Their minimum wage laws are no exception. California has one of the highest minimum wages as a state. And in 2021 and beyond, the minimum wage is set to continue to increase through the year 2023. Employers in the State of California are challenged by the complexity of figuring out how the increase in the minimum wage will impact their business. One challenge for California employers is keeping track not only of federal and state minimum wage requirements, but also minimum wage requirements in specific counties and cities in the state who have legislated their own minimum wage. The minimum wage increase amount is dictated by the size of the business and the number of employees. This guide will detail everything you need to know about minimum wage in California in 2021 and moving forward.

 

What’s the state minimum wage for 2021 and how will it change?

State-wide, California has incrementally raised the state’s minimum wage pursuant to Senate Bill 3 2017-2023 since January 2017.[1] As of January 1, 2021, California’s hourly minimum wage increased from $13.00 per hour in 2020 to $14.00 per hour in 2021 for employers with 26 employees or more. The increase in minimum wage for employers with 25 employees or less is $13.00 per hour, an increase from $12.00 per hour in 2020. California’s minimum wage will be adjusted on a yearly basis through 2023 – increasing $1.00 per hour annually. By the year 2023, all California employers, regardless of size will have a $15/hour minimum wage.

 

Is the minimum wage on the net or gross amount?

The minimum wage is calculated on the gross amount paid to an employee, that is, before taxes. The net amount is the amount an employee receives after taxes and other fees are deducted from the employees paycheck.

 

Does the minimum wage apply to all types of companies?

Some type of minimum wage applies to all employers in California. However, the specific wage amounts varies by the size of the company as described above. The minimum wage amounts still apply to restaurant workers and other employees who get paid tips. A business may not factor in tips to the minimum wage.

 

What’s the difference between local, state, and federal minimum wage?  

Currently, the federal minimum wage is set at $7.25, though there are discussions to raise this minimum to $15/hour by the year 2025.[2] The California state minimum wage is set at $14 or $13 per hour depending on the size of the company. Locally, minimum wages can be set higher than the state standard. In San Francisco (and Berkeley), the minimum wage is $16.07/hour as of July 2020, and is set to increase in July 2021 and onward based on the consumer price index.[3] Several other cities in California have minimum wages higher than the state’s standard. To keep track of the various minimum wages across the state, the University of California Berkeley Labor Center has maintained an inventory of wage levels and scheduled increases in the minimum wage.[4]

Depending on their location and if an employer operates in more than one locale, different minimum wages are applicable. Importantly, an employer must follow the stricter wage standard (i.e. the one most beneficial to the employee) for the city they are working in.[5] For example, if a company based in Bakersfield but their employees work in San Diego for the week, then they need to pay their employees San Diego minimum wage for the time they worked there. For most cities, working more than 2 hours in any given week requires an employer to pay that city’s minimum wage for hours worked within that city.

Are some types of employees exempt from the minimum wage law?

The minimum wage applies to minors and adults alike. No employee can decide to work for less than the mandated minimum wage. However, certain employers are exempt including sheepherders, outside salespersons, individuals who are the parent, spouse, or child of the employer, and certified apprentices. Other employees classified as learners may be paid at least 85 percent of the minimum wage during their learning period. Employees who are mentally or physically disabled are also exempted, though their employers need a special license. Visit the state’s website for specific definitions and to learn more.[6]

 

What obligations do employers have to communicate the minimum wage?

Employers need to prominently display minimum wage posters in a place like a breakroom or bathroom. If an employer has employees who only speak and read Spanish, they need to also display a Spanish language minimum wage poster.[7] Employers should post the federal wage poster, state wage poster, as well as the city minimum wage poster if they are operating in that city. Employers should also communicate the minimum wage whenever they are asked about it.

 

Is there a penalty for violating the minimum wage standard?

Yes. If an employer pays an employee less than the minimum wage they are subject to a wage claim, a civil penalty, the back wages owed plus interest, and potentially liquidated damages too. Likewise, no employer can penalize an employee for asking to be paid the minimum wage.

See also Minimum Wages in New York State 2021

Minimum wage by state

[1] https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201520160SB3

[2] https://www.cnbc.com/2021/01/26/democrats-reintroduce-15-minimum-wage-bill-with-unified-control-of-congress.html

[3] https://sfgov.org/olse/minimum-wage-ordinance-mwo

[4] https://laborcenter.berkeley.edu/inventory-of-us-city-and-county-minimum-wage-ordinances/

[5] https://www.dir.ca.gov/dlse/faq_minimumwage.htm

[6] https://www.dir.ca.gov/dlse/faq_minimumwage.htm

[7] https://www.dir.ca.gov/FAQworkplacepostings3.htm