A Guide to Minimum Wage Laws in California for Employees
Minimum wage refers to the minimum hourly rate of pay that employees must be paid for their work. Generally, employees must be paid the highest minimum wage that has been established for the jurisdiction in which they work.
What is the California Minimum Wage?
At the federal level, minimum wage is governed by the Fair Labor Standards Act. Federal law currently sets minimum wage at $7.25 per hour. However, federal law allows states and cities to set a minimum wage that is higher than the federal rate. 29 U.S.C. § 218(a).
California has established a higher minimum wage than the federal rate, so employers in California are required to pay the minimum wage that has been established by state law (unless an even higher rate has been established by the city or county in which they operate – see below). Labor Code § 1182.12. The California minimum wage is scheduled to increase gradually over time.
California minimum wage rates and their scheduled increases are shown in the following table:
|Hourly Minimum Wage Rates in California|
(January 1 to December 31)
|Employers with more 25 or|
|Employers with more|
than 25 employees
For January 1, 2024, and thereafter, the California minimum wage is automatically adjusted using a methodology tied to the consumer price index.
The methodology for further increases essentially applies an increase over the prior minimum wage that is equal to the lesser of:
- “[T]he rate of change in the averages of the most recent July 1 to June 30, inclusive, period over the preceding July 1 to June 30, inclusive, period of the … nonseasonally adjusted United States Consumer Price Index for Urban Wage Earners and Clerical Workers (U.S. CPI-W).”
The result is rounded to the nearest ten cents. If the CPI-calculated rate is negative, then there is no increase or decrease in the minimum wage for the following year. Labor Code § 1182.12(c).
If the Governor determines that economic conditions do not support the minimum wage increase, a scheduled increase may be temporarily suspended. When the Governor suspends the increase, it is simply postponed until the following year. Labor Code § 1182.12(d).
Local California Minimum Wage Rates
Some cities and counties within California have established higher minimum wages than the state’s level.
per hour as of July 2018
|San Francisco||$15.00||Adjusted annually based on CPI|
|Oakland||$13.23||Increases tied to CPI-W for San Francisco-Oakland-San Jose|
|Berkeley||$13.75||Increases to $15.00 October 1, 2018, and tied to CPI thereafter|
|Los Angeles||$13.25*||*For employers with more than 25 employees ($12.00 for employers with 25 or fewer employees)|
|San Diego||$11.50||Increases tied to CPI|
|San Jose||$13.50||Increases to $15.00 on January 1, 2019|
The University of California at Berkeley has compiled and maintains local city and county level minimum wage rates here.
Who must be paid California minimum wage?
The minimum wage must be paid by employers to employees in “all industries.” Employer means “any person who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person.” Labor Code § 1182.12. Employees who work in the state must be paid California’s minimum wage even if they don’t live in California. See Sullivan v. Oracle Corp.
Employees cannot waive their right to receive the California minimum wage. This means that even if an employee agrees to work for less than minimum wage or agrees to any arrangement that would result in them receiving a lesser rate of pay, that agreement is considered unlawful and will not be enforced. See Civil Code §§ 1668 and 3513. This is the case even if the agreement is a collective bargaining agreement.
When doesn’t California minimum wage apply?
- Executives, administrative staff, and professionals. California’s minimum wage laws do not apply to staff classified as executive, administrative or professional. However, the exemption of these types of positions from minimum wage law is basically moot.
This is because to meet the legal definition of executive, administrative or professional, an employee must be paid a salary that would put their equivalent hourly “wages” well above the minimum wage. For these employees, their monthly salary must be at least twice the state minimum wage, assuming they are working 40 hours per week. So, if the applicable minimum wage is $11.00 per hour, the monthly salary required to qualify as an executive, administrative staff or professional would be $3,813 (two times $11 per hour times 40 hours per week times 52 weeks per year, divided by twelve months per year).
- Learners. An employee in a job in which they do not have similar or related experience may be paid at a rate that is 85% of the minimum wage, rounded to the nearest nickel. This only applies during their first 160 hours of employment. After 160 hours of employment, their wages must be increased to 100% of the minimum wage.
- At camp. Camp counselors and student employees of an “organized camp” may be paid at 85% of the hourly minimum wage rate. Labor Code § 1182.4, subdivision (a). An “organized camp” means an outdoor site with programs established to provide an outdoor group living experience “with social, spiritual, educational, or recreational objectives” for at least five days during a season. Health and Safety Code § 18897(a). Trailer parks, resorts, motels, hunting camps, and penal or correctional camps do not count as “organized camps.” Health and Safety Code § 18897(b).
- Disabled. The Division of Labor Standards and Enforcement of the State of California may issue licenses to authorize employment of persons whose “earning capacity is impaired by physical disability or mental deficiency at less than the minimum wage.” The employers and the employee, or the employee’s representative, must jointly apply for this license. The minimum wage rate that must be paid in these circumstances is set by the Labor Commission. Labor Code § 1191.
- Sheltered Workshops and Rehabilitation Facilities. The Division of Labor Standards and Enforcement may issue licenses to nonprofit organizations, such as a sheltered workshop or rehabilitation facility, fixing a special minimum wage rate to enable employment of certain persons without requiring an individual license for the employee. 8 CCR §§ 11010-11170, subdivision 1(D).
- Immediate family. Parents, spouses, children and legally adopted children of an employer are not subject to minimum wage laws. 8 CCR §§ 11010-11170, subdivision 1(D).
- Outside Salespersons. Outside salespersons are exempt from minimum wage laws, provided certain requirements are met. An outside salesperson is someone 18 years of age or older who “customarily and regularly works more than half the working time away from the employer’s place of business selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities.”
The “employer’s place of business” can be any fixed location, whether it is owned by the employer or not. It could mean the salesperson’s own home if that is where the employee otherwise conducts the employer’s business. For this exemption to apply,
not only must more than half the employee’s time be spent away from the place of business, the employee’s activities that take place away from the place of business must consist of sales.
It should be noted here also that exemptions from labor laws are generally “narrowly construed” because there is “strong public policy favoring the protection of workers’ general welfare and society’s interest in a stable labor market.” Taylor v. UPS, 190 Cal.App.4th 1001 (2010). This means courts will be quite strict in applying the requirements for an exemption to be met.
Independent Contractors. Independent contractors are not required to be paid minimum wage. This is because, by definition, independent contractors are not considered employees. That said, there are many factors that go into determining whether or not a worker is legitimately classified as an employee or an independent contractor. It is important to note that the label attached by the parties to the relationship is not the deciding factor. Estrada v. FedEx, 154 Cal.App.4th 1 (2007). Rather the essence of the question whether someone is working as an independent contractor or an employee is the degree of control exercised over the worker in the “actual conduct” of the person or entity hiring the worker. Estrada. Even if the employer and the worker enter into an agreement that explicitly states that the worker is an independent contractor, a court will still look to the amount of direction and control that the contracting entity exercises over the worker’s work.
Some Special Cases
Not all employees are paid by the hour. Some employees are compensated on a commission basis and some employees are paid by the task, the job or the number of pieces they produce. How California minimum wage law apply in those cases?
The bottom line for these types of situations is that the employer is required to compensate such employees “not less than” the California minimum wage for all hours worked in the payroll period. 8 CCR §§ 11010-11170.
Many workers, especially in the garment industry, are paid by the piece. Here’s how this might work.
Suppose an employer pays $.25 per piece and a worker finishes 40 pieces in an hour, then the total earned at the piece rate would be $10. The employer, however, must still pay at least the minimum wage. So, if this work is happening in San Diego where the minimum wage is currently $11.50 per hour, the employee must still be paid $11.50 for that hour of work.
Now suppose the same worker, over the course of a 40-hour week, completes 2,008 pieces, resulting in a total piece rate for the week of $502. If we are still in San Diego, a 40-hour work week at minimum wage would result in weekly pay of $460. In this case, then, even though the worker may have earned less than $11.50 per hour during some of his or her 40 hours of work, overall the amount earned would seem to meet minimum wage requirements. In California, however, it might not.
This is called “pay averaging.” The legality of pay averaging varies depending on jurisdiction. Some federal courts have found pay averaging to be an acceptable practice under the Fair Labor Standards Act. See, e.g., Medrano v. D’Arrigo Brothers Co. 336 F.Supp.2d 1053 (N.D.Cal. 2004).
Under California law, however, pay averaging for piece work is not permitted. Gonzalez v. Downtown LA Motors, 215 Cal.App.4th 36 (2013).
In California, rather, the employer must compensate the employee the minimum wage for each hour the employee must be at work, even if the piece-rate work for some of those hours results in pay that is higher than minimum wage for those hours. Furthermore, employers must pay workers for any time the worker is required either to wait around or to perform tasks other than the piecework tasks for which they are receiving piece-rate pay. Gonzalez.
As with piece-rate work, employees who are paid on a commission basis must be paid at least the minimum wage for all hours worked. For commission sales, however, the relevant time frame over which California minimum wage must be paid is the entire pay period, rather than each hour.
Employees paid on commission must generally be paid at least twice per month. Labor Code § 204(a). (Commissioned car salespersons, however, may be paid just once per month. Labor Code §204.1.) The timing of when commissions are earned and paid is usually covered by an employment agreement, but there are times when the commissions paid for a pay period will not meet minimum wage requirements. In those situations, the employer must make up the difference between how much has been paid for earned commissions and what the California minimum wage would otherwise require as minimum pay during the period. As with the pay averaging issue described above for piece-rate work done per hour, commissions paid in one pay period cannot be carried over and counted as meeting the California minimum wage requirements in later pay periods. Peabody v. Time Warner Cable, 59 Cal.4th 662, 669 (2014).
A “split shift” refers to a work schedule in which the work period is interrupted by non-paid, non-work periods (other than bona fide rest and meal breaks) established by the employer. When a minimum wage employee is required to work a split shift, the employer must pay a “split shift premium” in the form of one extra hour of pay. Thus, if an employee works a total of eight hours in a split shift at minimum wage, the employee must be paid for a total of nine hours. 8 CCR §§ 11010-11170 subdivision 4(C). If an employee earns more than the minimum wage for a split shift, the employee is still entitled to the split shift premium whenever the number of hours worked plus one hour paid at minimum wage would exceed the pay earned by the actual hours they worked at their regular rate of pay.
Deductions from the California minimum wage
Payment of minimum wages refers to employees’ gross pay, which means the amount the employee receives before taxes and other legitimate deductions are withheld. Wherever these kinds of deductions are authorized by law, they are not treated as reducing the employee’s California minimum wage.
Meals and Lodging
Meals and lodging may only be credited against minimum wage with the employee’s written agreement. 8 CCR §11000. There are limits to the value of meals and lodging that may be credited toward minimum wage obligations, depending on whether the meal is breakfast, lunch, or dinner, and depending on whether the lodging is a room occupied alone, a room shared, or an apartment. Meals must be “adequate,” appropriate for the employee’s work shift and consist of a “well-balanced serving of a variety of wholesome, nutritious foods.” 8 CCR §§ 11010-11170, subdivision 10.
Furthermore, the lodging must be available for full-time occupancy and be deemed “adequate, decent and sanitary according to the usual and customary standards.” Employees may not be required to share a bed. If meals are not actually taken or lodging is not actually used, the employer may not take any credit for them against the minimum wage otherwise due. 8 CCR §§ 11010-11170, subdivision 10.
The maximum credits that may be claimed by employers who furnish lodging or meals, as of January 1, 2018, are as follows:
|Employers with 25 or fewer employees||Employers with 26 or more employees|
|Shared Room||$40.76 / week||$42.70 / week|
|Individual Room||$49.38 / week||$51.73 / week|
|Apartment occupied by 1 person – two thirds (2/3) of the ordinary rental value, but no more than||$593.05 / month||$691.29 / month|
|Apartment occupied by a couple where both are employed by the employer – two thirds (2/3) of the ordinary rental value but no more than||$877.26 / month||$919.04 / month|
Under California law, unlike the federal Fair Labor Standards Act, an employer cannot count an employee’s tips toward meeting minimum wage. U.S. Dept. of Labor. Tipped employees are entitled to receive the full minimum wage before tips in California. Labor Code § 351. Tips are considered the property of the employee who earned them and cannot, therefore, be treated as wages. Labor Code § 351.
“Tip pooling,” where employees are required to pool and then share tips, is allowed, provided that neither the employer nor the employer’s agent receives any share of the pool. Jameson v. Five Feet Restaurant, 107 Cal.App.4th 138, 141 (2003). An employer’s agent is “every person other than the employer having the authority to hire or discharge any employee or supervise, direct, or control the acts of employees.” Labor Code § 350(d).
How is the California minimum wage enforced?
Filing a complaint or lawsuit
If an employer refuses or fails to pay the California minimum wage in compliance with the law, employees may either file a wage claim with a federal or state agency, or they may file a civil lawsuit. Labor Code § 1194. Under California law, employees are entitled to recover the full amount of the unpaid balance owed, including interest, as well as reasonable attorney’s fees and costs. Labor Code § 1194.3.
Time limits for acting
There are time limitations for how long a California minimum wage violation claim may be filed after it has occurred. For California minimum wage claims, the time limit is usually three years. If the violation is based on a written agreement, the time limit is four years.
No Retaliation Allowed
Employers may not discriminate, retaliate or take any adverse actions against employees who exercise their rights under the California Labor Code. § 98.6, subdivision (a). This is true whether the employee merely brings an issue to the attention of the employer or whether the employee files a complaint or lawsuit.