California Minimum Wage Update for 2023 | Davis Wright Tremaine LLP – Update Cali

The start of the new year will bring many changes to California’s state and local minimum wage laws. California employers would be wise to note the following changes, effective January 1, 2023, that will affect both non-exempt and exempt employees.

California Minimum Wage Act of 2023

Currently in 2022, the minimum wage is $15.00 per hour for employers with 25 or more employees and $14.00 per hour for employers with fewer than 25 employees. On January 1, 2023, California’s statewide minimum wage will increase to $15.50 an hour. All employees regardless of the size of their employer. This accelerated increase requires a provision of the existing minimum wage law, which was triggered as inflation exceeded seven percent.

Additional inflation adjustments to the minimum wage shall be determined on or before August 1 for each subsequent year as required by California Labor Code Section 1182.12.

California voters may further accelerate future minimum wage increases. The California Living Wage Act of 2022, a proposed ballot measure to raise California’s minimum wage to $18.00 an hour over the next three years, failed to gather enough signatures to qualify for the November 2022 ballot. However, supporters are expected to bill will renew its efforts in 2023.

2022-2023 California Local Minimum Wage Ordinance

In addition to California’s statewide minimum wage increase, many cities and counties have enacted their own minimum wage ordinances that exceed state requirements. If the applicable local minimum wage for an employee is more generous than the state minimum wage in that location, employers must follow local laws.

The charts below show the changes to local minimum wage rates across California that went into effect on July 1, 2022, as well as the changes scheduled to go into effect on January 1, 2023.

Effective July 1, 2022

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Effective January 1, 2023

Click for a PDF version of this chart here.

2023 Salary Increase for Exempt Employees in California

In order for an individual to qualify as an exempt employee, California law requires that the individual:

  • perform duties associated with a position that is eligible for an exemption (eg, executive, administrative, or professional exemptions) for more than 50 percent of their working hours; and
  • Get paid at least twice the state minimum wage for a full-time job. The annual minimum wage is based on the current state (not local) minimum wage, calculated as follows: (minimum wage x 2) x 2,080 hours.

Effective January 1, 2023, the minimum wage for all California exempt employees will increase to $64,480.00 per year.

California’s increased minimum wage will also have an impact on insider commissions. Under California law, commission salespeople are exempt from state overtime laws if the employee earns more than 1.5 times the state minimum wage and more than half of the employee’s compensation is commission. So to maintain their exempt status in 2023, credential sellers will have to earn inside over 1.5 times increased state minimum wage.

Key things

California employers must ensure compliance with state and local minimum wage laws. If the local minimum wage rate exceeds the state minimum wage rate, employers must follow the local rate.

In addition, employers should review the remuneration of tax-exempt employees to ensure that the applicable threshold is met.

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