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July 1 Minimum Wage Rates Affect Other California Prevailing Wage Rules

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Overtime, unpaid vacation and commissioned inside salespeople

Los Angeles, CAOn July 1 the minimum wage rate increased in 13 California cities and counties, including Los Angeles and San Francisco. Most minimum wage workers in these jurisdictions should have already seen the difference. These increases also ripple through California prevailing wage laws in less obvious ways. Employers who fail to comply with the full implications of the required wage increases may not have seen wage and hour lawsuits yet, but they likely will.   

July 1 minimum wage increases

As of July 1, the minimum wage has increased in the following jurisdictions, regardless of the number of workers employed by the employer:
  • Alameda              $15.00
  • Berkeley              $15.00
  • Emeryville           $15.00
  • Milpitas                $15.00
  • San Francisco     $15.00
(City and County)
  • San Leandro       $15.00
As of the same date, employers in the following jurisdictions must comply with a two-tiered structure, with the lower rate for those who employ between 1 and 25 employees, and the higher one for those who employ 26 or more employees:

                                 1-25                       26+
  • Freemont            $13.50                   $15.00
  • Los Angeles        $14.25                   $15.00
(City and County)
  • Mailbu                  $14.25                   $15.00
  • Pasadena            $14.25                   $15.00
  • Santa Monica     $14.25                   $15.00
  • Santa Rosa          $14.00                   $15.00
Novato has adopted a three-tiered structure, requiring employers who employ between 1 and 25 employees to pay workers at least $13.00 per hour; those who employ at least 26 but fewer than 100 workers to pay at least $14.00; and those who employ at least 100 workers to pay at least $15.00 per hour. Hayward and San Carlos have delayed their scheduled minimum wage increases from July 1, 2020 to January 1, 2021, citing the economic impact of Covid-19.

Overtime, accrued vacation, tipped employees, workers who make barely more than the minimum

Many California prevailing wage laws, including overtime rules are pegged to the workers “regular rate of pay,” rather than the minimum wage, per se.  This means that overtime pay for minimum wage workers in the cities and counties that require a July 1 increase should be calculated under the new, mandated rate, even if the worker did not receive that rate because of employer error. Workers should check their pay stubs very carefully, especially in the first few months of the new rules.

Workers whose employment terminates must also be paid for any earned, accrued and unused vacation time in their final paycheck. If the accrual is attributable to work performed after June 30, vacation must be paid at the new required rate. As above, the calculation may get a little tricky and employers will make mistakes, so check your pay stubs.

Workers who make a substantial portion of their pay through tips should remember that they must be paid the same minimum wage as other California employees. For example, an employer may not count a waitperson’s tip income toward its obligation to pay the minimum wage.

Workers who make more than minimum wage, but just barely, may now have some small negotiating leverage with well-intentioned bosses. If the plan was to pay you more than the minimum wage, and you are now at the minimum, it feels like a pay cut. Consider whether it would be appropriate to ask for a raise.

Minimum wage rates impact low-paid managers and inside salespeople

Exempt executive, administrative and professional employees must, among other requirements, earn a salary of no less than two times the state minimum wage for full-time employment. Otherwise, that worker must able to collect overtime.

To determine whether a low-paid manger, for example, is really a manager and not just an underpaid wage worker,  he or she must earn an annual salary of at least the minimum  x  2  x  2080 hours.

Accordingly, effective July 1, 2020, the minimum salary threshold for a San Francisco worker to be classified as an exempt manager is $62, 400 ($15 x 2 x 2080 hours).

Commissioned inside salespeople are also affected by the minimum wage increase. Under California law, commissioned inside salespeople are exempt from the state’s overtime protections only if they meet two requirements:
  • the employee earns more than 1.5 times the minimum wage; and
  • more than half of that worker’s compensation comes from commission earnings.

What can you do if your employer fails to pay minimum wage?

If your employer fails to pay you the applicable minimum wage, you may file a lawsuit. This may be a situation where a class-action minimum wage lawsuit can make sense, even for lower-paid workers.

Damages include the wages that should have been paid, interest and reasonable attorneys. An employer may also be required to pay a civil penalty of $100 for the initial pay period of an intentional violation and $250 for each subsequent pay period of violation, whether the failure was intentional or not. In some situations, an employer may also have to pay additional “liquidated damages” equal to the amount of unpaid required minimum wages and interest. For an aggrieved worker, that can work out to double the unpaid wages.

Finally, it is important to note that it is unlawful for your employer to retaliate against you for filing a lawsuit over failure to pay the minimum wage.


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