The California Department of Industrial Relations has announced that the state hourly minimum wage will increase to $15.50 an hour on Jan. 1, 2023. The new rate will apply to all employers, regardless of how many individuals they employ.
July 27, 2022: California announced a $15.50 minimum wage rate for 2023
Jan. 1, 2023: Effective date for the new state minimum wage rate
California’s Minimum Wage Rate
In 2016, California decided to increase the state’s hourly minimum wage rate to $15 per hour by 2023. To facilitate this increase, the state adopted a phase-in schedule that differentiated between employers with 25 or fewer employees and employers with 26 or more employees, but ultimately allowed all employers in the state to reach the $15 minimum wage rate gradually. The schedule was set to expire and establish the state’s $15 minimum wage rate on Jan. 1, 2023. However, Labor Code section 1182.12(c)(3)(A) also requires the state to adjust its minimum wage rate when inflation in the state exceeds 7%. As a result, on July 27, 2022, California’s Department of Finance certified that based on the annual inflation rate from July 1, 2021, to June 30, 2022, the state minimum wage must increase from $15 to $15.50 an hour for all employers.
Note: California law requires the state to adjust its minimum wage rate when inflation in the state exceeds seven percent.
Impact on Employers
California employers update their payroll processes and procedures to comply with the new minimum wage rate by Jan. 1, 2023.
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This Legal Update is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.