Under California law, the minimum wage must increase in response to inflation. California Labor Code section 1182.12 assigns authority to the Director of California’s Department of Finance to annually determine and certify to the governor and state legislature whether a change to the minimum wage is appropriate.
On July 31, the Director of California’s Department of Finance published a letter indicating the minimum wage needed to rise in 2024 by 3.5% to account for inflation. The Director based this determination on calculations which show the CPI-W, the Consumer Price Index for urban wage earners and clerical workers, rose by more than 6 percent from July 1, 2022, to June 30, 2023, as compared to the previous 12-month period. Based on that data, the agency determined that a minimum wage increase of 3.5 percent must be put into effect for 2024.
Due to the upcoming minimum wage hike, the minimum wage rate for all employers with California employees will increase from $15.50 to $16.00 beginning on January 1, 2024.
This minimum wage increase stands to affect more than minimum wage earners and their employers. For example, the increase will also affect the maximum amounts for meals and lodging that an employer may credit against minimum wage. Additionally, employers who require employees to provide their own hand tools and equipment necessary to perform their duties are required to pay to those employees at least two times the minimum wage. As such, wages for those employees will also go up. The inflation-related minimum wage increase will also affect salary requirements for exempt workers, exemptions for employees who receive commissions, and required overtime rates employees covered by collective bargaining agreements. Employers will also need to update their minimum wage poster for employees.
Hunt Ortmann’s Employment Law Group is ready to help answer any questions related to how the increase in minimum wage will affect your business.