California minimum wage increase: what employers need to know

As with every other business cost, the minimum wages are adjusting up in 2022. Across the nation, 30 states and 46 localities have adopted a minimum higher than the federal wage. Of these, 18 states and D.C. have indexed their wage for inflation and automatically adjust each year. California is one of them, with a provision in the state’s minimum wage law for when inflation reaches above 7%. Many cities and Los Angeles County, have created additional ordinances to increase the minimum wage.

California’s most recent bump went into effect on January 1, 2022, bringing the hourly minimum wage to $14.00/hr for 1-25 employees, and $15.00/hr for employers with over 26 employees, and adjusting the minimum allowable salary for an exempt employee up to $58,240. Another increase is projected to go into effect on January 1, 2023, to $15.50, regardless of employee size.

If you’re a California employer or thinking of hiring in the Sunshine State, here’s what you need to know.

Exceptions to the wage increase

As a general rule under CA law, all workers are covered by state minimum wage, even those who are undocumented. However, a few employees in a few settings are exempt:

• Learners, who get paid 85% of the minimum during their first 160 hours
• Disabled employees, who get paid a wage set by the Labor Commission
• Camp employees, who may be paid 85% of the minimum
• Immediate family members of an employer⁠
• Certain nonprofit employees if the organization gets a special license through the Labor Commission
• Outside salespeople

Rules employers must follow

Although the increase isn’t state-wide, many localities will have a wage increase, some increasing by over 7%. There are different state, local and federal minimum wages in California – and most employers must follow both federal and state laws for wages. When the state and/or locality minimum surpasses the federal minimum, employers must adhere to the highest applicable wage, unless they are considered exempt under law. As always, employers must adhere to the stricter requirement or the one that is more beneficial to the employee.

Differences in employment types

What’s more unusual, California has different minimum wages for different types of employers and work settings based on employer size and industry – typically hospitality. The July 1 ordinance in West Hollywood set a minimum wage of $18.35 for hotel workers, the highest in the country. UC Berkeley keeps a detailed list of minimum wage ordinances, available here – consider bookmarking it!