Paying below Californian minimum wage - is it legal?

Not all employees fall under the minimum wage laws and not all employers follow the same minimum wage

Paying below Californian minimum wage - is it legal?

Californian employers have the duty to provide the adequate and fair pay to employees – this includes understanding the state laws on minimum wage protocols. While companies do their best to keep up with the minimum wage laws of the state, the question on whether it is legal to offer pay below the minimum wage pops up more often.

Below, we discuss the minimum wage in California and what HR leaders can do to provide fair and competitive pay for employees.

What is the minimum wage in California?

The Federal minimum wage in the US is $7.25 per hour for any non-exempt worker. Despite this, the minimum wage varies from state-to-state and will be followed if the state minimum wage is larger than the federal minimum wage.

As of May 2022, California holds the highest statewide minimum wage in the country with $14 an hour for employers with 25 or less employees and $15 an hour for employers with 26 or more employees. There are certain Californian cities and counties who offer their own minimum wages such as Berkeley with a minimum wage of $16.32, San Francisco with $16.32, and San Jose with a minimum wage of $16.20. If the Californian city or county has a higher minimum wage than the state’s, then the employer must pay the higher minimum wage.

The minimum wage of California is set to increase soon. According to The Los Angeles Times, anti-poverty activist and entrepreneur Joe Sanberg filed the Living Wage Act of 2022, which seeks to raise the state’s minimum wage to $18 an hour by as soon as 2025. Meanwhile, Governor Gavin Nelson announced on May 12, 2022 that California’s minimum wage is projected to increase to $15.50 per hour for all employees and workers starting January 1, 2023. The increase is covered by Section 246 of the California Labor Code.

Read more: Five essential steps to prepare for a wage-and-hour audit

What are the exceptions to minimum wage requirements in California?

Californian law on minimum wage applies to the majority of employees and workers.  There are some circumstances where minimum wage laws do not apply.

For instance, student employees and camp counsellors can be exempted from the law since they are only paid 85% of the minimum wage. National service program participants such as people involved in AmeriCorps are exempted from the law.

Other employees exempted from the California minimum wage laws are salespersons who spend most of their working hours outside of their office, as well as the mentally ill and physically disabled workers under authorized non-profits and rehabilitation establishments.   

Employees can sue their employer for low minimum wage

As employers are obligated to pay their employees the higher minimum wage salary set for their state, city, or county, employees can sue the company if they are being paid lower than what is required by law.

An employee can file for damages against the employer. The minimum damages that are legally allowed in a Californian minimum wage complaint are the amount of wages owed to make up for the low salary, interest on that amount, valid attorney fees, and a civil penalty that punishes the employer through a fee of $100 for the initial pay period of intentional violation and $250 for succeeding pay period of violation. It is also possible for employees to receive additional liquidated damages of same value to the unpaid required minimum wages and interests.

Not every lawsuit succeeds as employers have a chance to prove that the low minimum wage was a mistake that happened out of good faith. However, employers cannot start a workplace retaliation against an employee’s complaint.

Alternative offers employers can provide

If, for some valid reason, employers are unable to offer a high salary for employees, there are many options employers could offer to balance out the minimum wage and make the employment offer competitive and satisfactory to the standards of employees. For one, offering a more relevant benefits package could play a big part in enticing employees to stay and to attract new talent. HR leaders should take the time to study the needs and lifestyle of the workforce, and see what benefits fit them the most such as finding the most useful health package and the most relevant wellness perks. Many employees would enjoy the additional perks and benefits which could help ease them in their lifestyle activities and expenses.

Offering opportunities for career growth and development is also a great option to provide employees who are not offered competitive wages. Most employees are looking to expand their knowledge and gain more experience in their field and would appreciate a company that allows them to explore many options that would be of interest to them. Providing educational tools and training, mentorship programs, and constant check-ins with employees on their concerns and situations are great examples in encouraging career growth within the workplace. Career development also allows employees to increase their salary and employment package that fits their demand.

Read more: Should the minimum wage be increased?

With all the options HR leaders could offer to their employees to stay relevant in their industry and to keep employees happy, it is still the better option to offer the wage salary that is higher or competitive in their industry. Wages and salary play a big role in employees from leaving an employment. It is up to employers to step up and offer the proper amount even without the negotiations and pleas of employees.

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