Starting January 1, 2017, minimum hourly pay in CA will rise from $10 to $10.50, for companies that employ more than 25 employees. However, there is no change to the minimum wage for businesses that employ 25 or fewer workers which in effect creates a two-tier wage structure. Some municipalities have taken this matter into their own hands. San Diego’s minimum wage will jump to $11.50 per hour, effective January 1. Los Angeles set a minimum hourly rate of $10.50 last July 1 which will increase to $12 per hour on July 1, 2017.

Recently California’s Division of Labor Standards Enforcement (“DLSE”) issued an FAQ regarding these changes.The DLSE guidance regarding the state test can be summed up as follows:

•The statute does not specify what timeframe to use when calculating the number of employees, but a court or DLSE will likely focus on the pay period(s) in which a violation is alleged.
•All employees will be counted, including exempt employees, regardless of hours worked or their location.
•Employers must make a reasonable, good faith determination, which should take into consideration that the law is generally interpreted to favor workers.
•In joint employment scenarios, all individuals under an employer’s control are counted.
•If workers are provided by a staffing agency, an employer should count those individuals as its employees.

There are five local jurisdictions in California that use a two-tier minimum wage system based on whether an employer has 26 or more, or 25 or fewer, employees: City of Los Angeles; County of Los Angeles (unincorporated areas); Malibu; Pasadena; and Santa Monica.