The 12 Days of California Labor and Employment Series – Day 10 "Minimum Wage Updates"

In the spirit of the season, we are using our annual "12 Days of California Labor and Employment" blog series to address new California laws and their impact on employers. On the tenth day of the holidays, my labor and employment attorney gave to me ten lords a-leaping and AB 610, SB 828, and other minimum wage updates.

Minimum Wage for Fast Food Workers

As of April 1, 2024, the minimum wage for covered fast food workers increased to $20/hour. California law initially defined "fast food restaurant" to mean a limited-service restaurant in the state that is part of a national fast food chain.

When the law was passed, an exemption was created for an establishment that, on September 15, 2023, operated a bakery in a prescribed manner as long as it continued to operate such a bakery; certain restaurants in grocery establishments were also exempted.

Additional Exemptions Created

With the enactment of AB 610, additional exemptions were added. These were added because legislators determined that these locations have a distinct economic and captive customer base, are often operated subject to concession or food service contracts, and have different employment structures than the typical fast-food restaurant.

The law was effective immediately upon being passed on March 25, 2024. As such, the fast food minimum wage does not apply to restaurants at all of the following places:

• hotels,
• airports,
• large event centers,
• theme parks,
• museums,
• gambling establishments,
• corporate campuses, or
• certain public lands.

Minimum Wage for Healthcare Workers

SB 825 was enacted last year and created different classifications for healthcare workers with increased minimum wage amounts over a staggered time frame. The first increase was set to take effect on June 1, 2024, as we described in last year's blog series.

However, SB 828 was signed into law on May 31, 2024, and took effect immediately. It maintained SB 825 and the minimum wage increases for health care workers with one amendment. The first increase was delayed one month and began on July 1, 2024.

We are currently in the first year of the minimum wage increases, with the next minimum wage increase taking effect as early as July 1, 2025.

Classifications and Minimum Wage Scale

1. The following entities must pay their covered healthcare employees $23 per hour from July 1, 2024, to June 30, 2025, $24 per hour from July 1, 2025, to June 30, 2026, and $25 per hour from July 1, 2026, until as adjusted as specified:

• any covered healthcare facility with 10,000 or more full-time equivalent employees;
• any healthcare facility employer that is part of an integrated healthcare delivery system or healthcare system with 10,000 or more full-time equivalent employees;
• a covered healthcare facility employer that is a dialysis clinic or is a person who owns, controls, or operates a dialysis clinic; or
• a covered health facility owned, affiliated, or operated by a County with a population of more than 5 million as of January 1, 2023.

2. The following entities will owe a minimum wage of $18 per hour from July 1, 2024, to June 30, 2033, with 3.5 percent annual increases and $25 per hour from July 1, 2033, until adjusted as specified:

• hospitals with a high governmental payor mix;
• an independent hospital with an elevated governmental payor mix;
• a rural independent covered healthcare facility; or
• a covered healthcare facility that is owned, affiliated, or operated by a County with a population of less than 250,000 as of January 1, 2023.

3. The following entities will see the minimum wage increase to $21 per hour from July 1, 2024, to June 30, 2026, and $22 per hour from July 1, 2026, to June 30, 2027, and then from $25 an hour from July 1, 2027, until as adjusted as specified:

• prespecified clinics, including a clinic per Section 1206(h) of the Health and Safety Code;
• a community clinic;
• a rural health clinic; or
• an urgent care clinic,

4. All other covered healthcare facility employers must increase the minimum wage for healthcare employees to $21 per hour from July 1, 2024, to June 30, 2026, and $23 per hour from July 1, 2026, to June 30, 2028, and then from $25 per hour from July 1, 2028, until as adjusted as specified.

5. A licensed skilled nursing facility, in certain instances, must increase the minimum wage to $21 per hour from July 1, 2024, to June 30, 2026, $23 per hour from July 1, 2026, to June 30, 2028, and $25 per hour from July 1, 2028, until as adjusted as specified.

California Minimum Wage Updates

Additional minimum wage changes that employers should take note of include the following:

• Effective January 1, 2025, the state minimum wage increases from $16 to $16.50.
• Employers must also monitor individual city and county minimum wage rules where their businesses are located and can visit this site for more information. 
• The new threshold for computer professional exemption is $118,657.43 annually or $56.97/hour.
• The new minimum wage threshold for exempt employees increases to $68,640.

Hot off the presses, it appears that the Los Angeles City Council has voted in favor of raising the minimum wage for hotel and LAX workers to up to $30/hour over a staggered time period leading up to the Olympics. The current plan (absent any changes prior to the effective date of the ordinance) is that hotel and LAX workers will receive the following minimum wages:

• $25/hour on February 1, 2025, or the effective date of the ordinance
• $26.25/hour on July 1, 2025
• $28.75/hour on July 1, 2026
• $28.75/hour on July 1, 2027
• $30/hour on July 1, 2028

In addition, it was also voted that covered employers will also be mandated to provide a health payment of $8.35/hour in addition to the minimum wage for these workers.  We will provide further updates as this issue develops.

Key Takeaways for California Employers

1. The first step employers should take is to verify that their employees are properly classified. A yearly review of classifications is a sensible step to help minimize wage and hour issues due to misclassification. Having a point person for this task will streamline the process and help ensure the requisite review and updates are handled in a timely manner. 

2. Next, employers need to ensure they have the $16.50 minimum wage in place and verify that there is no other county or city minimum wage that is higher and applicable. If there is one, the highest minimum wage is the one that must be applied.

3. In addition, with the new threshold for exempt employees, employers must also review exempt employees whose salaries are under the threshold to determine if an adjustment is necessary.

4. Lastly, employers in the fast food or health care sectors should confirm they are paying the correct rates and also monitor when the next increase takes effect for health care workers.