California’s Minimum Wage and Paid Family Leave Benefits Set to Increase Substantially

By Marlene Nicolas and Nora Stiles © Sheppard Mullin May 13, 2016

April 2016 has proven fruitful for California employees. Governor Brown approved a series of gradual increases raising the statewide minimum wage rate in California to at least $15 by 2022. A week later the governor approved Assembly Bill No. 908, which revises the income-based formula to calculate benefits for a leave of absence covered by either California’s Paid Family Leave (PFL) or State Disability Income (SDI) programs for leave periods commencing on or after Jan. 1, 2018. Below is a quick synopsis of these new laws.

State Minimum Wage Increases

All California employers with 26 or more employees will be required to increase the minimum wage paid to workers, according to the following schedule:

Date

Minimum Wage Rate In Effect

Jan. 1, 2017

$10.50

Jan. 1, 2018

$11

Jan. 1, 2019

$12

Jan. 1, 2020

$13

Jan. 1, 2021

$14

Jan. 1, 2022

$15

 

All California employers with 25 or fewer employees will be required to increase the minimum wage paid to workers, according to the following schedule:

Date

Minimum Wage Rate In Effect

Jan. 1, 2018

$10.50

Jan. 1, 2019

$11

Jan. 1, 2020

$12

Jan. 1, 2021

$13

Jan. 1, 2022

$14

Jan. 1, 2023

$15

 

Paid Leave Benefit Increases

State law currently provides covered employees six weeks of paid family leave at 55 percent of their pay for time off work to care for a seriously ill or injured family member or to bond with a minor child within one year of birth or placement of the child in connection with foster care or adoption. The SDI program provides benefits to individuals who are unable to work because of their own illness or injury. This paid leave is funded by payroll contributions to SDI.

Pursuant to the new law, for periods of leave commencing on or after Jan. 1, 2018, but before Jan. 1, 2022, an individual’s weekly benefit amount will be calculated as follows:
 

Wages Paid (In the Highest-Income Quarter)

Weekly Benefit Amount

Less than $929

$50

$929 or more but less than 1/3 of the state average quarterly wage

70 percent of the amount of wages paid in the highest wage quarter, divided by 13

Wages were at least 1/3 of the amount of the state average quarterly wage

The greater of: 23.3 percent of the state average weekly wage; or 60 percent of the amount of wages paid in the highest wage quarter, divided by 13

 

In addition, effective Jan. 1, 2018, the seven-day unpaid waiting period for PFL benefits will be removed. As a result of this new law, California employers can expect increased use of PFL and SDI benefits.

Having a plan to manage employees through these changes is key. California employers are encouraged to implement a system to monitor local, state and federal minimum wage increases and address other legal requirements that are based on the same.

In addition to the statewide minimum wage increases, California employers are subject to different minimum wage rates in different jurisdictions across the state. For example, the minimum wage for hours worked within the city limits of Los Angeles will increase to $10.50 per hour on July 1, 2016, and to $15 per hour by 2020.

Further, changes to the minimum wage require employers to inform employees of the new rates, update posted notices and assess whether it is necessary to increase the hourly wage or salary paid to certain employees to ensure continued compliance with state-based wage and hour exemptions that rely on the state’s minimum wage to determine eligibility.

Employers should also be mindful of additional paid leave requirements in different jurisdictions. For example, San Francisco just increased paid parental leave obligations for employees who work within city limits that require employer contribution in addition to the state provided amounts.

Marlene Nicolas and Nora Stiles are attorneys with Sheppard Mullin in Los Angeles. © 2016 Sheppard Mullin. All Rights Reserved. Reposted with permission.

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