Just like earlier this year, because of the enactment of SB 3 (Leno) in 2016, California’s minimum wage is going up again. On Jan. 1, 2019, the state’s minimum wage will be increased for all sizes of businesses as “small employers” will see their second wage hike in recent years.

Under prior state law, the minimum wage for all industries increased to $10 per hour on Jan. 1, 2016. Pursuant to SB 3, the minimum wage for all industries will be increased to $15 per hour by Jan. 1, 2022, for businesses employing 26 or more employees and by Jan. 1, 2023, for businesses employing 25 or fewer employees (referred to as “small employers”).

The law does provide that the scheduled increases may be temporarily suspended by the Governor based upon him or her making certain determinations. Additionally, the law requires the Director of Finance, after the last scheduled minimum wage increase, to annually adjust the minimum wage under a specified formula. In the meantime, the wage will go up incrementally each year.

The following lists the scheduled minimum wage increases for any business that employs 26 or more employees:

  • On Jan. 1, 2019, to $12 per hour
  • On Jan. 1, 2020, to $13 per hour
  • On Jan. 1, 2021, to $14 per hour
  • On Jan. 1, 2022, to $15 per hour

The following lists the scheduled minimum wage increases for any business that employs 25 or fewer employees:

  • On Jan. 1, 2019, to $11 per hour
  • On Jan. 1, 2020, to $12 per hour
  • On Jan. 1, 2021, to $13 per hour
  • On Jan. 1, 2022, to $14 per hour
  • On Jan. 1, 2023, to $15 per hour

In February 2014, the Congressional Budget Office issued a report regarding the impact of the proposal to raise the federal minimum wage to $10.10 an hour. The conclusion was that, although some low-wage workers would receive a higher income through the increased minimum wage hike, “some jobs for low-wage workers would probably be eliminated, the income of most workers who became jobless would fall substantially, and the share of low-wage workers who were employed, would probably fall slightly.”

To make matters worse here in California, these scheduled increases in the state’s minimum wage not only increase hourly employees’ wages, but also salaried employees’ compensation. In order for employees to qualify as “exempt” under any of the six exemptions in this state, they must meet the salary-basis test, which is two times the monthly minimum wage (as well as the duties test that is not impacted by the wage hike).

With the enactment of SB 3, there will be an increase of over $15,000 in wages per exempt employee in just a few short years. And businesses will see their workers’ compensation premiums go up, as well as increased costs for uniform/tool reimbursements and overtime.

While the business community had argued that SB 3 should contain a regional minimum wage, this proposal was rejected. Some can appreciate that certain cities and counties in California may be able to afford an increased minimum wage, but other cities and counties are still struggling with high levels of unemployment. Employers in these areas will find it much more difficult to sustain such a dramatic increase in their labor costs.

Chris Micheli is a legislative advocate with the Sacramento governmental relations firm of Aprea & Micheli, Inc.