2023 California Minimum Wage Update

The start of the new year will bring many changes to California's state and local minimum wage laws. California employers would be wise to take note of the following changes—set to take effect on January 1, 2023—that will impact both non-exempt and exempt employees.

2023 California State Minimum Wage Law

At present in 2022, the minimum wage is $15.00 per hour for employers with 25 or more workers and $14.00 per hour for employers with fewer than 25 workers. On January 1, 2023, California's statewide minimum wage will increase to $15.50 per hour for all employees, regardless of the size of their employer. This accelerated increase is required by a provision in the state's existing minimum wage law that was triggered because inflation exceeded seven percent.

Further adjustments for inflation to the minimum wage will be determined on or before August 1 for each subsequent year, as required by California Labor Code section 1182.12.

California voters may further accelerate future minimum wage increases. The California Living Wage Act of 2022, a proposed ballot measure to raise California's minimum wage to $18.00 per hour over the next three years, failed to collect enough signatures and did not qualify for the November 2022 ballot. However, it is expected that proponents of the bill will renew their efforts in 2023.

2022-2023 California Local Minimum Wage Ordinances

In addition to California's statewide minimum wage increase, many cities and counties have enacted their own minimum wage ordinances that exceed state requirements. If an applicable local minimum wage rate is more generous to employees than the state minimum wage rate in a given locality, employers must comply with the local law.

The charts below show changes to local minimum wage rates throughout California that took effect on July 1, 2022, as well as those set to take effect on January 1, 2023.

Effective July 1, 2022

For a PDF version of this chart, click here.

Effective January 1, 2023

For a PDF version of this chart, click here.

2023 California Salary Increases for Exempt Employees

For an individual to qualify as an exempt employee, California law requires that the individual:

• Perform duties associated with a position that qualifies for an exemption (e.g., executive, administrative or professional exemptions) more than 50 percent of their work time; and
• Earn a salary of no less than two times the state minimum wage for full-time employment. The minimum annual salary is based on the current state (not local) minimum wage, calculated as follows: (minimum wage x 2) x 2,080 hours.

Effective January 1, 2023, the minimum salary for all California exempt employees will increase to $64,480.00 per year.

California's increased minimum wage will also impact commissioned inside salespeople. Under California law, commissioned inside salespeople are exempted from the state's overtime laws if the employee earns more than 1.5 times the state minimum wage and more than half of the employee's compensation represents commission earnings. Thus, in order to maintain their exempt status in 2023, commissioned inside salespeople will need to earn more than 1.5 times the increased state minimum wage.

Key Takeaways

California employers must ensure compliance with both state and local minimum wage laws. Where a local minimum wage rate exceeds the state minimum wage rate, employers must comply with the local rate.

Additionally, employers should review compensation for exempt employees to ensure that the applicable salary threshold is satisfied.

If you have any questions about your company's compliance, please contact a member of DWT's Employment Services Group.