Minimum Wage Compliance

Post the New Employer Poster

Get a 2008 Employer Poster that displays the new rate.

Ensure Hourly Wages Meet the New Minimum

Adjust all minimum pay rates to $8.00 per hour; $12.00 per hour for time-and-a-half; and $16.00 per hour for double time.

You may need to adjust salaried, nonexempt employees' salaries to correspond with the new minimum wage (see Wage Compression).

Review Exempt Employee Salaries

In California, the test for exempt status includes minimum salary levels that are tied to the hourly minimum wage. Most exempt employees must be paid a salary of at least twice the hourly minimum. To maintain exempt status after Jan. 1, 2008, you must be sure that each exempt executive, administrative and professional employee's salary meets the new minimum salary requirements of $2,773.33 per month ($33,280 per year).

If you employ exempt commissioned inside salespersons, they must:

1. Earn more than one-half their compensation from commissions

2. Not have weekly earnings less than one-and-one-half times the state minimum wage

If you increase the salespersons' base rate to meet the new minimum, but they experience no increase in commissions, they may fail to meet the first part of the test. If the combination of hourly rate and commissions doesn't equal or exceed the second test on a weekly basis, the overtime exemption is also lost.

Examine Your Policies

Review your company's various policies to adjust all minimum rates to $8.00 per hour or more. For example:

• Travel Time. You pay nonexempt employees a reduced "travel rate" while traveling on business that is different from their normal hourly rate. Make sure it meets at least the new minimum wage. Learn more
• Piece Rate. You pay employees a piece rate. Even with a piece rate, employees must make at least the minimum hourly wage. Managers or other personnel who review payroll must be told about the new minimum wage amount to ensure accurate payment and compliance with wage and hour laws. Learn More
• Split Shift. An employee works a split shift so one hour's pay in addition to hours actually worked at the minimum wage is due. The minimum wage must be adjusted for the new rate. Learn More
• Subminimum Wage. The hourly rate for employees who may be paid subminimum wage must be based on the new minimum wage, resulting in an increase for these workers. Learn More 
• Tools, Uniforms and Equipment Costs. Employees whose wages are at least two times the minimum wage may be required to provide and maintain hand tools and equipment customarily required by the trade or craft. The new minimum wage may bring some employees below the minimum for this requirement. Learn More

Indirect Effects

Also remember to assess the secondary effects of the minimum wage change:

• Cost of Benefits. The cost of some benefits, including workers' compensation, rise in direct relationship to compensation. Review your benefits for costs that rise in direct relationship with increased wages to determine what effect compensation increases will have on your 2007 expense budget.
• Collective Bargaining Agreements. Employees covered by a union agreement are exempt from the Wage Orders' overtime requirements, if employees' regular hourly rate is not less than 30 percent more than the state minimum wage and their agreement includes its own overtime premiums. Review the collective bargaining agreement to verify it's still in compliance with the increase in minimum wage.