Minimum Wage Changes Effective January 1, 2016

Governor Brown increased California’s minimum wage in phases in AB10: “. . . [1] on and after July 1, 2014, the minimum wage for all industries shall be not less than nine dollars ($9) per hour, and [2] on and after January 1, 2016, the minimum wage for all industries shall be not less than ten dollars ($10) per hour.”​ This new law affects pay scales for exempt and non-exempt employees.

For non-exempt employees, on and after January 1, 2016, even your lowest-level worker must earn at least $10/hour. Accordingly, overtime for the lowest-level worker would be at $15/hour and double-time at $20/hour.

For exempt employees, the employee’s duties must qualify under a special “duties” test and the salary to be paid must be at least twice the minimum wage for a full-time employee. This memorandum only addresses the salary test. On and after January 1, 2016, the exempt full time employee must receive at least $800/week ($20/hour x 40 hours) and $41,600 per year (per 52 weeks in a year). Under the “duties” test, the exempt employee must be doing an “exempt” duty more than 50% of their daily tasks. Certain computer software employees are exempt from the overtime requirements if certain criteria are met, including for the “salary” component. Effective on and after January 1, 2016, one of the criteria is that the computer software employee’s minimum hourly rate of pay must be $41.85, and the minimum monthly salary must be $7,265.43, and the minimum annual salary $87,185.14.

Most competitors will now either decrease employee hours or increase labor cost to consumer by increasing pricing.