Legal Update: Minimum Wage & Sick Pay

As Summer winds down, a host of new State and Local Ordinances have recently gone into effect that will no doubt leave many employers scratching their heads. At the State level, Governor Jerry Brown signed a new provision establishing a gradual increase of the State’s minimum wage. Beginning January 1, 2017, employers with 26 or more employees must pay at least $10.50 per hour. Effective January 1, 2018, employers with 26 or more employees must pay at least $11 per hour. Thereafter, and rising by $1.00 each of the next four years, employers with 26 or more employees will be required to pay at least $15.00 per hour. Employers with 25 or fewer employees have an additional year (January 1, 2018) before the first scheduled increase begins. Employers should also keep in mind that as the State minimum wage rises, so does the California minimum salary requirements for exempt employees (which is currently pegged at two times minimum wage times 2,080 hours for full-time employment). This means that once California reaches $15 per hour, the California minimum salary for an exempt employee will be $62,400.

Concurrently, several local Cities have enacted their own minimum wage laws for employees working within their jurisdictions, many of which require their own posting and compliance procedures. For example, effective July 1, 2016, both the City of Los Angeles and the Los Angeles County minimum wage increased to $10.50 per hour for employers with 26 or more employees. Thereafter, minimum wage will continue to increase on July 1 as follows:

Year	Employers with 26 or more employees	Employers with 25 or fewer employees
2016	$10.50	$10.00
2017	$12.00	$10.50
2018	$13.25	$12.00
2019	$14.25	$13.25
2020	$15.00	$14.25
2021	$15.00	$15.00

Importantly, the LA County minimum wage applies to anyone who works at least two hours in a one-week period within the unincorporated areas of Los Angeles County (i.e., anyone that works outside the City of Los Angeles or an incorporated city such as Santa Monica, Pasadena or Glendale), while the LA City minimum wage applies to anyone working within the City of Los Angeles. In addition, the LA City Ordinance also provides for increased sick leave accruals and usage above the current State minimums. Employers with 26 or more employees must allow their Los Angeles based employees to accrue and use at least 48 hours of sick leave per year — twice the mandatory minimum under State law. Businesses employing 25 or fewer workers will get an extra year to satisfy this new annual paid sick leave minimum. Los Angeles employers will have discretion to provide the paid sick leave either all up front or at an accrual rate of one hour for every 30 hours worked up to the cap (which can be set as low as 72 total hours). As with the California sick leave laws, employees can use their sick leave for a variety of reasons, including tending to an ill family member.

Along with the City of Los Angeles, the City of Santa Monica also enacted their own Ordinance, which provides that effective July 1, 2016, most employers with at least 26 employees must pay their Santa Monica based employees at least $10.50 per hour, with additional annual increases until the minimum wage reaches $15.00 per hour on July 1, 2020. Smaller businesses (less than 26 employees) and qualifying nonprofits have an additional year to phase in the increased rates. The following table summarizes the future increases:

Year	Employers with 26 or more employees	Employers with 25 or fewer employees	Hotels
2016	$10.50	*$10.00	$13.25
2017	$12.00	$10.50	$15.37+CPI**
2018	$13.25	$12.00	TBD**
2019	$14.25	$13.25	TBD**
2020	$15.00	$14.25	TBD**
2021	$15.00	$15.00	TBD**

*CA state minimum wage

** From 2017 and onward, Santa Monica’s hotel wage rate will match the City of Los Angeles hotel wage. Beginning July 1, 2018 (for hotels) and July 1, 2022 (for other businesses), the minimum rate will increase annually by the Consumer Price Index (CPI).

Hotels and businesses operating on hotel property will phase in more quickly to $13.25 on July 1, 2016, and will match the Los Angeles hotel wage ($15.37 + consumer price index increase) on July 1, 2017. In addition, the Ordinance includes provisions related to service charges that must be distributed in full to employees and increased paid sick leave benefits scheduled to take effect on January 1, 2017.

Similarly, the City of Long Beach’s “Pathway to $15” Ordinance will become effective on January 1, 2017, and will increase the minimum wage in the City to $10.50 beginning on January 1, 2017, and then again to $12.00 on January 1, 2018 and $13.00 on January 1, 2019. As the increases occur, the City Council will study the economic impacts of the new minimum wage increase and, if there are no major negative impacts, the minimum wage will continue to increase to $14.00 on January 1, 2020, and ultimately to $15.00 on January 1, 2021.

In Pasadena, the City enacted its own Ordinance effective July 1, 2016 for large employers (26 or more employees), and effective July 1, 2017 for smaller employers (25 or fewer employees). The Ordinance provides for a steeper increase in minimum wage than the California increase, as follows:

Date	Employers with 26 or more employees	Employers with 25 or fewer employees
July 1, 2016	$10.50	No increase beyond California minimum wage
July 1, 2017	$12.00	$10.50
July 1, 2018	$13.25	$12.00

The City of San Diego also enacted its own Earned Sick Leave and Minimum Wage Ordinance effective as of July 11, 2016. The Ordinance provides for a minimum wage of $10.50 per hour for employees working at least 2 hours per week in the City. The minimum wage will increase again to $11.50 per hour effective January 1, 2017. The minimum wage will increase again on January 1, 2019, and each year thereafter according to the Consumer Price Index.

Effective September 2, 2016, the Ordinance will allow employers to cap an employee’s total accrual of sick leave at 80 hours. Usage can be capped at 40 hours per year, but unused, accrued sick leave must be carried over to the following benefit year. The baseline accrual rates (1 hour for every 30 worked) remain the same as State law, and employers may also satisfy the accrual by front-loading no less than 40 hours of sick leave at the beginning of each benefit year.

The new State and Local rules bring the opportunity for continued compliance, but also the chance to update existing policies, procedures, and postings regarding these new laws. Should you have any compliance questions, or general employment matters to discuss, please feel free to contact the author, Jesse Caryl at Bent Caryl & Kroll, LLP. BCK is a boutique labor and employment firm focused on representing employers of all sizes in California.

Author: Jesse Caryle