To prepare for the coming year, employers in California should plan for mandatory wage and salary increases that go into effect on January 1, 2021.
Mandatory Increase to Minimum Wage
On January 1, 2021, the minimum wage for non-exempt employees in California will increase to $14 per hour for employers with 26 or more employees and $13 per hour for employers with 25 or less employees. These increases are set forth in Labor Code section 1182.12.
If an employee performs work in a city that has its own minimum wage ordinance that is different than the state standard, the employer is required to pay the highest of these rates. Information regarding which cities have established minimum wage ordinances can be found on this list, which is regularly updated by the University of Berkeley.
Increase to Salaries for Exempt Employees
Although many employers are familiar with the requirement to increase wages for non-exempt employees, some may overlook the need to increase salaries for exempt employees when there is an increase to minimum wage. Beginning on January 1, 2021, exempt employees in California must receive a minimum annual salary of $58,240 if their employer has 26 or more employees, and $54,080 if their employer has 25 or fewer employees. The Department of Industrial Relations maintains a list of occupations that may be considered exempt, which can be found here.
Earlier this year, the Department of Industrial Relations released clarifications on the requirements for Computer Software Employees and Licensed Physicians and Surgeons to be considered exempt. Beginning on January 1, 2021, the minimum hourly rate for computer software employees will be $47.48, while the minimum hourly rate for licensed physicians and surgeons will be $86.49.
Employers should make any needed adjustments to their employees’ wages and salaries to ensure compliance with mandatory increases that go into effect at the start of the new year. If you have any questions regarding which employees may be considered exempt, please contact an experienced employment attorney.