Federal minimum wage law is governed by the Fair Labor Standards Act (FLSA). The current federal minimum wage rate is $7.25 per hour for nonexempt employees. California law complements federal law and, in some cases, prescribes more stringent or additional requirements that employers must follow. Whenever employers are subject to both state and federal laws, the law most favorable to the employee will apply.
The Division of Labor Standards Enforcement (DLSE), part of the California Department of Industrial Relations, enforces and investigates minimum wage violation claims.
MINIMUM WAGE RATE
Effective Jan. 1, 2018, the minimum wage rate in California is $11 per hour for employers with 26 or more employees and $10.50 per hour for employers with 25 or fewer employees.
“Employee wages” are the entire amount of compensation an employee receives for his or her labor or services. Wages can be fixed or based on time, task, piece, commission or other method.
Minimum wage rate increases will take place every year until the minimum wage rate reaches $15 per hour by 2022. After the rates described below are implemented, the state will adjust the minimum wage rate annually to reflect the rising cost of inflation.
California law allows the governor to temporarily suspend the minimum wage rate increase schedule if the state’s economic condition does not support an increase. Under a temporary suspension, the implementation schedule would be delayed by one year. However, the governor may not implement a temporary suspension more than twice.
MEALS AND LODGING CREDITS
If the employee voluntarily agrees in writing, employers may generally include in employee wages part of the cost of meals and lodging they provide.
The adjacent table provides the maximum amount employers may credit for meals and lodging. Special rules exist for sheepherders and employees of organized camps.
• Sheepherder wages cannot be offset by meal and lodging credits; and
• Organized camps may deduct the entire value of meals and lodging from the salary of a student-employee, camp counselor or program counselor.
Refer to the California wage orders for more information on industry-specific meal and lodging credits.
In California, employers must pay tipped employees a wage rate equal to or greater than the state’s minimum wage rate. Employers may not deduct a tip credit from their employees’ wages. Tip payments include any tip, gratuity, money or other gift a patron gives an employee over and above the actual amount of the goods, food, drink, items or services the patron received from that business.
Employers cannot enter into contracts with their employers to override tipped employee regulations.
SUBMINIMUM WAGE RATES
California law allows disabled workers, apprentices, learners, student-employees, camp counselors and program counselors to receive wage rates below the minimum state rate. In certain cases, a license may be required for a subminimum wage rate to apply. When a license is required, the DLSE may set the terms and conditions of employment. Licenses may be revoked if the employer violates any term or condition of employment set by the license.
Employers that obtain a special license issued by the DLSE may pay disabled workers a wage rate below the state’s minimum wage rate. Employers must generally obtain a separate license for each disabled employee. These licenses are valid for up to one year, and must be renewed on a yearly basis.
Nonprofit employers, including sheltered workshops and rehabilitation facilities, may receive a general license to employ disabled employees at subminimum wage rates, instead of individual licenses for each employee. Employers may be required to renew these licenses every year or on a more frequent basis.
APPRENTICES AND LEARNERS
The DLSE may also issue special licenses authorizing employers to pay subminimum wage rates as low as 85 percent of the state’s minimum wage rate to employees during their first 160 hours of employment in occupations in which they have no previous similar or related experience.
Employers operating an organized camp can pay their student-employees, camp counselors and program counselors a minimum wage rate equal to 85 percent of the state minimum wage rate. These employers can also deduct the entire value of meals and lodging they provide to these employees.
MINIMUM WAGE RATE EXEMPTIONS
California’s minimum wage rate requirements do not apply to certain occupations and industries. Separate specific minimum wage rate and payment requirements, described in a series of minimum wage orders, apply for these employees.
Other exceptions to California’s minimum wage rate requirements include individuals who are closely related to their employer (parent, spouse or child) and outside sales personnel.
NOTICE AND POSTINGS
Employers are required to post and maintain updated information on the state’s minimum wage rate. The Industrial Welfare Commission (IWC) has provided a model poster that employers can use.
Employers covered by one of California’s industry-specific wage orders must also display a copy of the applicable wage order. These wage orders are available on the IWC’s website.
Business necessity is an overriding legitimate business purpose. Business necessity does not exist when the employee can demonstrate that the employer could have implemented or used an existing alternative practice that would avoid a wage differential while serving the same business purpose.
PROHIBITED WAGE DISCRIMINATION
In general, the California Equal Pay Law prohibits employers from discriminating on the basis of sex in the payment of wages.
Subject to some limited exceptions, female and male employees are entitled to equal pay for substantially similar work. Substantially similar work is determined by evaluating the level of skill, effort, responsibility and performance under similar working conditions.
California’s Equal Pay Law allows employers to pay different wages for employees of opposite sex when the wages are based on:
• A seniority system;
• A merit system;
• A system that measures earnings by quantity or quality of production; or
• A differential based on any bona fide factor other than sex.
Criminal, civil and administrative penalties may apply for violations of California’s minimum wage laws.
Employers that violate California’s minimum wage laws commit a misdemeanor, punishable by a fine of at least $100, imprisonment for at least 30 days or both a fine and imprisonment. Employers that violate tipped employee regulations also commit a misdemeanor, punishable by a fine of up to $1,000, imprisonment for up to 60 days or both.
Employers that pay wages below the state minimum wage rate or that violate California’s equal pay laws are subject to civil lawsuits, and could be ordered to pay:
• The difference between what an employee’s wages should have been and what they actually were (plus interest);
• Liquidated damages (in an amount equal to the wage difference plus interest); and
• Court costs and reasonable attorneys’ fees.
Employers may avoid paying liquidated damages if they can prove that their actions were in good faith.
Employee lawsuits must be filed within two years of when the violation takes place (or within three years, for willful violations). In the case of any wilful violation, the DLSE can request and obtain injunctions against any further violations.
The identity of any employee that files a complaint for wage discrimination with the DLSE will remain confidential during an investigation and will not be disclosed until the validity of the claim is established.
In addition to the civil penalties described above, the DLSE may issue citations for any employer that violates the state’s minimum wage laws. Cited employers may be subject to fines as follows:
• $100 per underpaid employee for each pay period in which the employee is underpaid, for a first offense; and
• $250 per underpaid employee for each pay period in which the employee is underpaid, for a second or subsequent violation.
Employers can appeal these fines by requesting a hearing within 15 days of receiving the citation.
Contact Warren G. Bender Co. for more information on wage payment and work hour laws in California.