On September 25, 2013, Governor Jerry Brown signed the bill to increase California’s minimum wage (AB 10).  The bill was passed overwhelmingly on straight party-line votes by the California state senate and assembly.  The bill would increase the current $8 per hour minimum wage to $9 per hour effective July 1, 2014.  The minimum wage will automatically increase a second time to $10 per hour effective January 1, 2016.

Employers with collective bargaining agreements in California should be certain to determine whether they will remain in compliance with overtime laws in light of the pending rate change.  Under most California Wage Orders, employers and unions are permitted to negotiate for overtime premiums that differ from the requirements of the Wage Orders provided that employees are covered by a valid collective bargaining agreement designating wages, hours of work, and working conditions, and the employees’ regular hourly rate is not less than 30 percent more than the state minimum wage.  Because AB 10 has been signed into law, employers should determine whether their union contracts or other procedures are affected.

In addition to possible implications for employers with collective bargaining agreements, all private employers with exempt employees in California must determine whether they will remain in compliance with wage and hour laws.  For an employee to be properly classified as exempt under the Executive, Administrative, and Professional Exemptions in the California Wage Orders, the employee must earn a monthly salary equivalent to no less than two (2) times the state minimum wage for full-time employment (40 hours per week).  When the new minimum wage goes into effect on January 1, 2014, the minimum salary test for the Executive, Administrative, and Professional Exemptions will increase from $33,280 to $37,440 annually.  Employers should review whether their exempt employees will still meet the salary requirement by July 1, 2014 and again by January 1, 2016.

Employers with any questions regarding the new minimum wage bill and its impact on their businesses should contact any member of this Firm’s Labor and Employment Department at (213) 620-0460.