California law mandates that the minimum wage be increased in response to inflation. Specifically, California Labor Code section 1182.12 delegates authority to the Director of Finance to annually determine and certify to the Governor and State Legislature whether an adjustment to the minimum wage is appropriate based the Consumer Price Index for urban wage earners and clerical workers (CPI-W).
The Department of Finance has calculated that the CPI-W has increased by over 6% from July 1, 2022, to June 30, 2023, as compared to the previous 12-month period. Thus, the agency determined that a minimum wage increase must be implemented. With this calculation, the Director of California’s Department of Finance recently published a letter stating that the minimum wage needed to rise by 3.5% to account for inflation. As a result of this inflation-related minimum wage increase, the minimum wage rate for all California employers will increase from $15.50 to $16.00 beginning on January 1, 2024.
The change in minimum wage has a domino effect on other California employment compliance areas that are linked to the state minimum wage. Many of the exemptions afforded to construction employers’ signatory to a collective bargaining agreement (CBA) are dependent on the CBA providing for “premium” wage rates. The following are some of the key areas the minimum wage increase may impact construction employers.
Collective Bargaining Agreements – Hours and Days of Work
Under California Industrial Welfare Commission Wage Order 16, construction employers and unions are permitted to bargain hours and days of work different from those required by the Wage Order so long as their employees are covered by a valid CBA designating wages, hours and working conditions and the employees’ regular hourly rate of pay is not less than 30 percent more than the state minimum wage. Contractors should determine whether their union agreements or other procedures are affected.
California Paid Sick Leave
Construction employers in California must provide paid sick days to their employees, unless the employees are covered by a valid CBA and fall under the exemptions included in Labor Code Section 245.5. The construction exemption to California’s paid sick leave law requires regular hourly pay of not less than 30 percent more than the state minimum wage be paid.
Tools or Equipment
Employers who require employees to provide their own tools or equipment may also be affected pursuant to Industrial Welfare Commission Wage Order 16. Generally, when tools or equipment are required by the employer or are necessary to the performance of a job, they must be provided and maintained by the employer. However, an employee receiving wages that are at least two times the state minimum wage can be required to provide and maintain their own hand tools and equipment customarily required by the trade or craft. If employers are taking advantage of this provision, they should ensure they are paying employees twice the new state minimum wage.
A link to the CA Department of Industrial Relations announcement can be found here: California’s Minimum Wage to Increase to $16 per hour in January 2024 | California Department of Industrial Relations
This content was provided by SCGMA legal counsel and is for general informational purposes only. Readers should consult with their own legal counsel for company specific legal advice.