California’s Minimum Wage Increasing to $15.50 on January 1, 2023

Due to the raising inflation, The California Department of Finance has confirmed that the minimum wage will increase to $15.50 per hour for all employers starting January 1, 2023. This 3.5% increase in hourly wage, different from past state wage increases, will equally apply to employers large and small, instead of a lower requirement for employers with 25 or fewer employees. This might prove difficult for small employers, given that minimum wage is currently $14.00 per hour. The increase will also apply to rest and recovery periods and other nonproductive time for piece rate workers separate from their piece-rate compensation. Piece rate workers must be paid their average hourly rate for the workweek or the applicable federal, state, or local minimum wage (whichever is greater) for their rest, recovery, and non-productive periods.

The new minimum wage increase will also initiate a corresponding raise in the minimum salary required to qualify as exempt under the “white-collar” exemptions. The exemption from having to pay overtime can be quite significant, as an exempt employee must receive the new minimum salary of $64,480 annually ($1,240 weekly) for all employers starting January 1, 2023. This notice deserves close attention, for misclassifying a nonexempt position as exempt could lead to lawsuits over missed breaks, meal periods, overtime pay and costly penalties.