Contributors

Christian Scali

Founder and Managing Shareholder

California enacted in 2016 a plan to reach a $15.00 per hour minimum wage, with wages set to increase steadily until they reach this point for all employers in 2023. The minimum wage is currently set statewide at $13.00 for small businesses (1-25 employees) and $14.00 an hour for large businesses (26+ employees), respectively. However, on July 1, 2021, many local jurisdictions are increasing their minimum hourly wages beyond these rates.

In jurisdictions where a local minimum hourly wage exceeds the state minimum hourly wage, such as San Francisco, Santa Monica, and Los Angeles (which includes unincorporated parts of the County), employers must comply with the local rate and raise its employees’ hourly wages, even if the wages are above $14.00 an hour. Other jurisdictions, such as Berkeley, Fremont, and Novato, tie an additional fee beyond an employee’s hourly wage, to the Consumer Price Index. Regardless of how the jurisdiction calculates its minimum wage, these increases affect both nonexempt and exempt employees.

Local minimum wages starting July 1, 2021

The following jurisdictions will change their minimum wage starting on July 1, 2021. Businesses may be required to post new wage order posters at that time.

Jurisdiction	Minimum Wage
Alameda (city)	$15.00/hour
Berkeley	$16.32/hour
Emeryville	$16.97/hour
Freemont	$15.25/hour (26 or more employees), $15.00/hour (1-25 employees)
Los Angeles and Unincorporated Areas of County (please note discussion below)	$15.00/hour
Malibu	$15.00/hour
Milipitas	$15.65/hour
Novato	$15.24/hour (100 or more employees), $15.00/hour (26-99 employees), and $14.00/hour (1-25 employees)
Pasadena	$15.00/hour
San Francisco	$16.32/hour
South San Francisco	$15.24/hour
San Leandro	$15.00/hour
Santa Monica	$15.00/hour
Santa Rosa	$15.20/hour

Employer size distinctions eliminated

As of July 1, Los Angeles is eliminating its prior distinction between small and large businesses in determining their minimum hourly wages, and all employers will be subject to the same minimum hourly wage.

Reminders regarding exempt v. nonexempt employees and commission wages

To qualify as an exempt employee (usually a non-hourly employee), the employee must:

1. Perform exempt duties more than 50% of their work time; and
2. Earn an annual salary of no less than two times the state minimum wage for full time employment in an executive, administrative, or professional capacity, calculated as:
   
   Annual Salary = (Minimum hourly wage x 2) x 2,080 hours (52 weeks at 40 hours/week)

For smaller employers subject to the statewide minimum wage that amount is $54,080 annually or $1,040/week. For larger employers subject to the statewide minimum wage that amount is $58,240 annually or $1,120/week. These calculations also apply where an employer is subject to a higher local minimum wage.

Please note that while commissioned sales people are exempt from California’s overtime laws, they are only exempt from such if:

1. The employee earns more than 1.5 times the state minimum hourly wage; and
2. More than half of the employee’s compensation represents commission earnings.

Therefore, to maintain their exempt status, commissioned inside salespeople will need to earn more than $19.50 or $21 an hour at small and larger employers, respectively, to meet the state minimum wage. This calculation also applies to higher local minimum wages. Contact Scali Rasmussen if you have any questions about the applicable minimum wage and wage calculations in your jurisdiction.