April 2016 has proven fruitful for California employees. Last month, Governor Brown approved a series of gradual increases raising the statewide minimum wage rate in California to at least $15.00 by 2022. A week later the Governor approved Assembly Bill No. 908, which revises the income-based formula to calculate benefits for a leave of absence covered by either California’s Paid Family Leave (PFL) or State Disability Income (SDI) programs for leave periods commencing on or after January 1, 2018. Below is a quick synopsis of these new laws.
State Minimum Wage Increases
All California employers with 26 or more employees will be required to increase the minimum wage paid to workers, according to the following schedule:
|Date||Minimum Wage Rate In Effect|
|January 1, 2017||$10.50|
|January 1, 2018||$11.00|
|January 1, 2019||$12.00|
|January 1, 2020||$13.00|
|January 1, 2021||$14.00|
|January 1, 2022||$15.00|
All California employers with 25 or fewer employees will be required to increase the minimum wage paid to workers, according to the following schedule:
|Date||Minimum Wage Rate In Effect|
|January 1, 2018||$10.50|
|January 1, 2019||$11.00|
|January 1, 2020||$12.00|
|January 1, 2021||$13.00|
|January 1, 2022||$14.00|
|January 1, 2023||$15.00|
Paid Leave Benefit Increases
State law currently provides covered employees six weeks of paid family leave at 55% of their pay for time off work to care for a seriously ill or injured family member or to bond with a minor child within one year of birth or placement of the child in connection with foster care or adoption. The SDI program provides benefits to individuals who are unable to work because of their own illness or injury. This paid leave is funded by payroll contributions to SDI.
Pursuant to the new law, for periods of leave commencing on or after January 1, 2018, but before January 1, 2022, an individual’s weekly benefit amount will be calculated as follows:
|Wages Paid (In the Highest-Income Quarter)||Weekly Benefit Amount|
|Less than $929||$50|
|$929 or more but less than 1/3 of the state average quarterly wage||70% of the amount of wages paid in the highest wage quarter, divided by 13|
|Wages were at least 1/3 of the amount of the state average quarterly wage||The greater of: 23.3% of the state average weekly wage; or
60% of the amount of wages paid in the highest wage quarter, divided by 13
In addition, effective January 1, 2018, the 7-day unpaid waiting period for PFL benefits will be removed. As a result of this new law, California employers can expect increased use of PFL and SDI benefits.
Having a plan to manage employees through these changes is key. California employers are encouraged to implement a system to monitor local, state, and federal minimum wage increases and address other legal requirements that are based on the same. In addition to the statewide minimum wage increases, California employers are subject to different minimum wage rates in different jurisdictions across the state. For example, the minimum wage for hours worked within the city limits of Los Angeles will increase to $10.50 per hour on July 1, 2016, and to $15.00 per hour by 2020. Further, changes to the minimum wage require employers to inform employees of the new rates, update posted notices, and assess whether it is necessary to increase the hourly wage or salary paid to certain employees to ensure continued compliance with state-based wage and hour exemptions that rely on the state’s minimum wage to determine eligibility. Employers should also be mindful of additional paid leave requirements in different jurisdictions. For example, San Francisco just increased paid parental leave obligations for employees who work within city limits that require employer contribution in addition to the state provided amounts.
If you have any questions about whether and how these new laws will affect your business, please contact the authors or your Sheppard Mullin attorney for assistance.