On July1st the California minimum wage increases to $9.00 per hour. Are you ready for all of the consequences of this change?
The obvious consequence is that overtime rates increase to $13.50 (time and one-half) and $18 (double time) for a minimum wage earner. The change also means that an employer paying minimum wage will spend an additional $2,080 per year, per employee, for the same services.
Another significant change affects exempt employees. An exemption is available only if the employee receives a minimum level of remuneration. In California that remuneration minimum is two times the minimum wage. As of July 1st, if your employee does not earn at least $37,440 annually ($3,120 monthly), the employee cannot qualify as exempt. (Don't forget the employee must also pass a duties test.)
But that's not all. You must keep records of hours worked by non-exempt employees. If you don't realize your employee lost the exemption because (s)he does not earn enough money, then you probably are not keeping time records for him/her. This will also result in a violation of Labor Code section 226 which requires certain information be included on paycheck stubs, including hours worked. The penalty for a section 226 violation is $100 per pay period up to a maximum of $4,000 plus attorneys's fees if the employee suffers an injury. Suffering an injury means that the employee cannot promptly and easily determine his/her wages. That is not a difficult standard to meet.
A non-exempt employee is also entitled to meal and rest periods. Thus, the employee you thought was exempt could claim penalties associated with missed meal and rest periods.
Finally, if the employee quits or is fired and you haven't paid overtime or missed meal period premiums then you will be subject to waiting period penalties calculated at the employee's daily wage for a maximum of 30 days.
So the increase to California's minimum wage has substantial consequences. Nothing is easy about California workplace laws. And just think, we have another increase on January 1, 2015.