McGeorge Adjunct Professor Chris Micheli

Just like in 2019, because of the enactment of Senate Bill 3 in 2016, California’s minimum wage went up again. On January 1st, the state’s minimum was increased for all sizes of business and small employers saw their third wage hike in recent years.

Under this state law the minimum wage for all industries is increasing from $10 an hour on January 1, 2016, all the way to $15 per hour. Pursuant to SB 3, the minimum wage for all industries will be increased to $15 per hour by January 1, 2022 if it’s for a business that employs 26 or more employees. That amount of $15 will be delayed until January 1, 2023 for businesses employing 25 or fewer employees. These are generally referred to as small employers.

Currently, it’s $12 per hour, except for small employers for whom it is $11 per hour. Now, the law does provide that the scheduled increases may be temporarily suspended by the Governor based upon him or her making certain determinations. Additionally, the law requires the Director of Finance, after the last scheduled minimum wage increase, to annually adjust the minimum wage under a specified formula. In the meantime, the wage amount will go up incrementally each year.

Note that there has been concern with increasing the minimum wage because of its impact elsewhere. With the enactment of SB 3, there will be an increase of over $15,000 in wages per exempt employee in just a few short years. In addition, businesses will likely see their worker compensation premiums go up, as well as increased cost for things like uniform or tool reimbursement, and overtime.

While the California business community had argued that SB 3 should contain a regional minimum wage, this proposal was rejected by the Legislature. Some can appreciate that certain cities and counties in California may be able to afford an increased minimum wage, whereas other cities and counties are still struggling with high levels of unemployment. Employers in these areas will find it much more difficult to sustain such an increase in their labor costs.