New California Minimum Wage in 2023
At the rate we’ve seen prices and interest rates rising, it should be no surprise that the minimum wage in the State of California is also increasing.
Starting on January 1st, 2023, the minimum wage for all California employers, regardless of size, will be $15.50/hour. This statewide minimum wage does not affect cities such as San Francisco or Los Angeles, where the city-specific minimum wage is $16.99/hour and $16.04/hour respectively, and already exceeds the new California minimum wage.
If you’d like to find out more about minimum wages in your area, please visit UC Berkeley’s updated list of California City and County minimum wages.
It’s important to remember that California’s minimum wage also impacts the salary requirement for exempt employees.
To be exempt from the requirement of being paid hourly wages, which includes but not limited to, overtime requirements, the employee must perform specified duties in a particular manner AND be paid “a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.” (Lab. Code, § 515, subd. (a).).
As a result, on January 1, 2023, the minimum salary requirement for exempt employees will increase to $64,480 annually ($5,373.33 monthly, $1,240 weekly).
This DOES NOT mean that employees who make the minimum payment requirement are automatically exempt employees. The minimum salary requirement is just one of several conditions that must be met in order for an employee to be classified as exempt.
For anyone with salaried or exempt employees, be sure to review their salaries and see how it compares to the new 2023 annual requirement.
Below, we identify common exemptions that arise in a workplace under California law and the requirements to meet each one. In addition to the salary requirements, you’ll notice all but one of these examples state the employee must perform more than 50% of their time performing the listed exempt duties.
Remember, the list below is just a few examples. We recommend reviewing all of the exemptions carefully to determine the correct classification for all of your hourly and exempt employees.
For help understanding each of the exemptions and their nuances, speak to your attorney, your Human Resources professional, or schedule a consultation to speak with me or another attorney at Tremblay Beck Law.
Executive/Managerial Exemption
In order to meet the executive (managerial) exemption, the employee must meet all of the following requirements:
- Employee’s duties and responsibilities involve the management of the enterprise in which he or she is employed or of a customarily recognized department or subdivision of the enterprise;
- Employee customarily and regularly directs the work of two or more other employees;
- Employee has the authority to hire or fire other employees, or whose suggestions and recommendations as to the hiring or firing and as to the advancement and promotion or any other change of status or other employees is given particular weight;
- Employee customarily and regularly exercises discretion and independent judgment in performing his or her duties;
- Is “primarily engaged” in duties that meet the test of the exemption (This is where the “performs more than 50% of their time in exempt duties” comes in);
- Earns a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.
Administrative Exemption
To meet the administrative exemption, an employee must meet all of the following requirements:
- Employee spends more than one-half of their work time performing office or non-manual work directly related to management policies or general business operations for the employer or the employer’s customers;
- Employee “customarily and regularly” exercises discretion and independent judgment in carrying out job duties as to matters significant to the employer’s business;
- Performs his or her job only under general supervision and works along specialized or technical lines requiring special training, experience, or knowledge; and
- Is paid a salary equivalent to no less than two times the state minimum wage.
Computer Professional Exemption
To be an exempt computer professional, the employee must meet the following requirements:
- The employee is primarily engaged in work that is intellectual or creative and requires the exercise of discretion and independent judgment.
- The employee is primarily engaged in duties that consist of one or more of the following:
- The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications.
- The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to, user or system design specifications.
- The documentation, testing, creation, or modification of computer programs is related to the design of software or hardware for computer operating systems.
- The employee is highly skilled and is proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering.
- The employee’s hourly rate of pay, or annual salary if paid on salaried basis, meets a minimum threshold amount set by California’s Division of Labor Statistics and Research (DLSR). For 2020, the DLSR set the amounts at $46.55 per hour or annual salary of not less than $96,968.33 for full time employment, and paid not less than $8,080.71 per month.
Commissioned Inside Sales Exemption
To qualify as an exempt commissioned inside sales employee, an employee must meet the following requirements:
- Employee’s earnings must exceed one and one-half times the California minimum wage; and
- More than half of the employee’s compensation must be commissions.
Employers must note that this exemption is only for the overtime requirement, and other wage and hour requirements such as minimum wage, meal and rest breaks, and time recording requirements still must be met.
Outside Salesperson Exemption
To qualify as an exempt outside salesperson the employee must:
- Be at least 18 years old;
- Must customarily and regularly work more than 50% their work time away from the employer’s place of business; and
- Must be engaged in selling tangible items or obtaining orders or contracts for products, services, or use of facilities.
Family Member Exemption
Any individual who is the parent, spouse, child, or legally adopted child of the employer
It is incumbent upon the Employer to prove when an employee challenges an exempt classification. California courts have made clear that the employer bears the burden of proof when asserting that an employee is an exempt employee:
- “[T]he assertion of an exemption from the overtime laws is considered to be an affirmative defense, and therefore the employer bears the burden of proving the employee’s exemption.” Ramirez v. Yosemite Water Co. (1999).
Remember, these are only a few of the most common exemption situations and requirements. You can view the complete list of exemptions on the California Department of Industrial Relations website.
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