2022 Minimum Wage and Salary Exemption Threshold Increases
The trend of increasing the minimum wage continues in 2022 as follows:
On January 1, 2022, the California minimum wage will increase to $15.00 per hour for employers with at least 26 employees, and $14.00 per hour for smaller employers. The state minimum wage also governs the exempt employee threshold salary, which has increased accordingly. The new minimum salary for employees who otherwise qualify to be exempt from overtime is $62,400 annually for employers with at least 26 employees, and $58,240 annually for employers with fewer than 26 employees.
California employers should also be aware that a proposed 2022 ballot measure proposed by Los Angeles anti-poverty activist and entrepreneur Joe Sanberg would raise the state minimum wage by $1.00 per year until 2025 for employers with at least 26 employees and 2026 for smaller employers. Thereafter, the minimum wage would increase each year by the rate of inflation up to 3.5%. The proposal permits the then-current governor to suspend minimum wage increases for a year if the state has a significant budget deficit or a decline in job growth or sales tax revenue.
Additionally, several California municipalities will raise their minimum wage rates on July 1, 2022. Employers should take care to note these changes because the pace of minimum wage increases in these locations will surpass increases required by the State of California in the race to reach the highest minimum wage.
For example, in the City of Los Angeles, Santa Monica, Malibu, unincorporated Los Angeles County, and Pasadena, the minimum wage is currently $15.00 for all employers. On July 1, 2022, in these locations, minimum wage will be adjusted based on the Consumer Price Index (CPI).
Notably, the City of West Hollywood enacted a number of hikes in minimum wage rates. Specifically, large businesses with 50 or more employees will be required to raise the minimum wage from the current $14.00 per hour to $15.50 on January 1, 2022, with further increases scheduled for July 1, 2022 at $16.50, January 1, 2023 at $17.50, and an estimated increase on July 1, 2023 to $18.77. Smaller businesses with fewer than 50 employees will be required to raise the minimum wage from the current $13.00 per hour to $15.00 on January 1, 2022, with further increases scheduled for July 1, 2022 at $16.00, January 1, 2023 at $17.00, and an estimated increase on July 1, 2023 to $18.77.
Employers should also be aware of industry specific wages rates set by local ordinances. For example, hotels in West Hollywood are required to raise their minimum wage from the current $14.00 per hour to $17.64 per hour on January 1, 2022, with further estimated increases on July 1, 2022 to $18.31 and on July 1, 2023 to $18.77. Beginning in 2022 for hotels and 2023 for all other businesses, annual increases will be tied to the Consumer Price Index and announced by the city by no later than April 1st with changes to take place on July 1st.
In determining whether a given increase applies, employers should know that it is not where an employee lives, or where an employer is based, that determines the minimum wage that must be paid. Rather, it is where the employee works that determines the minimum wage requirement that will be applied. In many municipalities, if an employee works as few as two hours in the city in a week, that municipality’s minimum wage applies to the time worked there for that week.
Federal Contract Workers:
On January 1, 2022, the hourly minimum wage for certain existing federal contracts will increase from $10.95 to $11.25. Additionally, beginning January 1, 2022, tipped employees performing work on or in connection with covered contracts generally must be paid a cash wage of at least $7.90 per hour.
Covered contracts that are entered into on or after January 30, 2022, or that are renewed or extended (pursuant to an option or otherwise) on or after January 30, 2022, will be generally subject to a higher minimum wage of $15 per hour.
The author would like to gratefully acknowledge the assistance of Joanne Warriner.
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