California and New York have each passed laws that will gradually raise their state’s minimum wage rate to $15 per hour. This is a stunning development coming just four years after a small group of New York fast food workers initiated the call for the increase. The new laws will impact millions of Americans and put pressure on other jurisdictions and business to make similar increases in other parts of the country. We briefly break down the new laws below.
California will increase its minimum wage incrementally from $10.00 per hour until it reaches in $15.00 per hour in 2022 – six years from now, and businesses with 25 or fewer employees will have an extra year to comply with each increase. Thereafter, the minimum wage is eligible to be adjusted annually by the lesser of 3.5% and the % change in the CPI, unless there is a negative % change over a certain period, in which case no increase will occur. Further, the law permits the governor to temporarily suspend scheduled increases if certain economic conditions are met, but it also requires their acceleration if other more favorable conditions are met.
The law is statewide, without regard to the urban-rural differences in cost of living that dominated the brief debate on the law.
California is the most populous state, and more than two million Californians currently make minimum wage. The University of California projects the new minimum wage will result in increased wages for approximately 5.6 million Californians.
Meanwhile on the East Coast, New York’s minimum-wage law will also utilize a wage increase schedule, but it will vary tremendously depending upon the employer’s location. In New York City, the minimum wage will increase to $15 per hour by the end of 2018, though businesses with fewer than 10 employees get an extra year. In the suburbs of Long Island and Westchester County, the wage rate will rise to $15 per hour by the end of 2022. In upstate New York, the minimum wage maxes out at $12.50 per hour by 2021, but will continue to increase over time based on favorable economic conditions.
Further, like California, the new law will permit the state to temporarily halt increases in the face of poor economic conditions.
Employers should note that the first two scheduled increases will occur this year – on July 1 and December 31.
The minimum wage raise is expected to affect more than 2.3 million New Yorkers.
Effect on Exemptions in California
Although millions of workers will see increased wages as mandated by the law, many more may see their overtime exemption status affected. In California, exempt employees must make twice the minimum wage. Currently, with a $10 per hour minimum wage, exempt employees must make a salary of at least $41,600.00. At $15 per hour down the road, the new exemption threshold will jump to $62,400.00 (which is well above the salary basis level currently contemplated under the DOL’s revised overtime rules). Thus, California employers need to keep a watchful eye on their exempt workers’ wages to make sure they stay in step with minimum-wage increases.