2018 Minimum Wage Requirements

2018 will be a year full of changes—especially when it comes to the minimum wage rate. This article covers this year’s wage increases—and which rate governs—the federal state, or local rate. The minimum wage increase also affects the minimum salary threshold for exempt (salaried) employees. Read on for these important updates!

Federal Minimum Wage

In 2016 the US Department of Labor passed a much anticipated, and hotly debated, regulation which increases the minimum annual salary for exempt employees. The proposed rule would require employers to pay (exempt (salaried) employees) $47,476 per year, or $913 per week, whereas the current federal rule requires employers to pay a minimum salary of $23, 660 per year, or $455 per week. We know, that’s a big jump!

However, on August 31, 2017, U.S. District Court Judge Amos Mazzant held that the regulation’s salary level exceeded the Department’s authority, and concluded that the regulation is invalid. Afterwards, the Department proceeded to move forward with a Request for Information (“RFI”), which seeks public input regarding what salary level or levels, if any, the Department should use in place of the 2016 figures in order to update the $455 weekly / $23,660 annual salary requirement.

We are still pending the results of this RFI, and what the increase would be, so stay tuned!

California Minimum Wage

As we’re sure you know, California employers must comply with the state’s minimum salary requirement for exempt (salaried) employees.  In California, exempt employees must earn a monthly salary of no less than two times the state minimum wage for full-time employment.

Exempt Employee Salary Requirement (Employers with 26 or more employees)

  • California’s minimum wage= $11.00 per hour (as of Jan. 1, 2018)
  • # of hours a full-time employee works in a week = 40
  • Number of weeks in a year = 52
  • Number of hours a full-time employee works in a year = 40 x 52= 2,080
  • Minimum annual salary for a full-time exempt employee beginning Jan. 1, 2018= $11.00 x 2= $22.00 x 2,080 = $45,760 per year
  • Minimum monthly salary for a full-time exempt employee beginning Jan. 1, 2018= $45,760 ÷ 12= $3,813.33

Exempt Employee Salary Requirement (Employers with 25 or less employees)

  • California’s minimum wage= $10.50 per hour (as of Jan. 1, 2018)
  • # of hours a full-time employee works in a week = 40
  • Number of weeks in a year = 52
  • Number of hours a full-time employee works in a year = 40 x 52= 2,080
  • Minimum annual salary for a full-time exempt employee beginning Jan. 1, 2018= $10.50 x 2= $21.00 x 2,080 = $43,680 per year
  • Minimum monthly salary for a full-time exempt employee beginning Jan. 1, 2018= $41,600 ÷ 12= $3,640

Read our article for more on what makes employees “exempt” from overtime pay.

Local Minimum Wage

Employers must comply with both state and federal minimum wage laws. Whichever law gives employees a higher wage rate governs.  But, to make it even more complicated, a local entity (a city or a county) may also enact a minimum wage rate that is higher than the state or federal minimum. Therefore, employers must know the federal, state, and local minimum wage rates—and choose whichever one gives the employees more. Here’s a comparison of the minimum wages in each state and here’s a breakdown of the minimum wage increases California’s counties and cities breakdown of the minimum wage increases California’s counties and cities.

Example

The City of San Diego’s minimum wage is $11.50, and will remain so until January 1, 2019. Since San Diego has a higher wage rate than California’s rate of $10.50  (or $11.00, depending on the amount of employees; see above) and the federal rate of $7.25, San Diego employers must pay their hourly employees a minimum wage of $11.50 through January 1, 2019. Note: The exempt minimum salary requirement is based on the current state minimum wage, not any applicable local minimum wage.

We know… it feels a bit like rocket science. As always, don’t hesitate to contact us if you have any questions!

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By: Jenna Macek – 12/11/16

Revised: 12/10/17

Related Resources:

 

Disclaimer:  Although this article may be considered advertising under applicable law and ethical rules, the information in this article is presented for informational purposes only.  Nothing herein should be taken as legal advice and this content does not form an attorney-client relationship.   If you would like further information, Wilkinson Mazzeo would love to hear from you, so please feel free to reach out with any questions!

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