by Elizabeth J. Boca
The minimum wage in California will increase from $9 to $10 an hour as of January 1. Employers must understand that paying the higher minimum wage alone doesn’t satisfy their obligations because the upcoming increase will spark a domino effect in various compliance areas. 
Exempt “white-collar” employees. Each time the state minimum wage increases, so does the minimum salary required for exempt white-collar employees. Under Labor Code Section 515, to qualify as exempt from overtime as an executive, administrative, or professional employee, a worker must earn a monthly salary equivalent to at least two times the state minimum wage for full-time employment totaling 40 hours per week, or 2,080 hours per year.
On January 1, the minimum salary will increase from $3,120 monthly ($37,400 annually) to $3,467 monthly ($41,600 annually). The minimum salary requirement isn’t prorated for part-time employees. Employers should review whether their exempt employees will still meet the salary requirement on January 1.
Commissioned salesperson exemptions. To qualify as exempt from overtime, a salesperson must earn commissions that total more than half of her compensation and at least 1½ times the state minimum wage for all hours worked (i.e., $15 per hour by January 1). Employers should review their policies to determine if their salespeople still qualify for the exemption on January 1.
Employees covered by CBAs. Employers must determine whether an applicable collective bargaining agreement (CBA) or other procedures are affected by the minimum wage increase.
Tools and equipment. Employers that are able to take advantage of California Wage Orders allowing them to require employees to provide and maintain their own hand tools and equipment must ensure that they will still qualify under the new minimum wage. Employers are allowed to require employees to supply their own tools if they earn at least two times the state minimum wage ($3,467 monthly or $41,600 annually).
Voluntary crediting agreements. Employers that have voluntary written agreements with employees for crediting meals or lodging against the minimum wage obligation under Section 10 of most California Wage Orders must adjust crediting agreements if they are affected by the minimum wage increase.
Independent contractors. Because employers already face large penalties for misclassifying independent contractors, the potential exposure for unpaid minimum wages as a result of misclassification will increase. Employers should review each agreement and classification to ensure it can withstand scrutiny from a court, the U.S. Department of Labor (DOL), the California labor commissioner, and the California Employment Development Department.
Other steps employers can take include:
- Ascertain if any local minimum wage ordinances apply.
- Review and adjust employees’ rates of pay to meet wage requirements before January 1.
- Review timekeeping systems and policies. Consider conducting an internal audit to ensure compliance with wage and hour laws.
- Remind managers and employees of policies that prohibit off-the-clock work and the appropriate complaint procedures if they are asked to work off the clock or don’t receive all the wages they are owed. Employers without such policies should implement them and distribute copies to the workforce.
- Ensure that employees review their time cards every pay period. Workers should personally verify and correct time cards each pay period and initial them by hand or computer login. Employees also should sign a statement each pay period verifying that all meal and rest periods were provided or made available to them.
- Make sure any “penalties” (e.g., missed meal periods) and sick pay are adjusted and will be paid at the proper rate after January 1.
For more information on the new California minimum wage, see the December 7, 2015, issue of California Employment Law Letter.
Elizabeth J. Boca is an attorney with Epstein Becker & Green, P.C. in San Francisco. She can be reached at eboca@ebglaw.com.