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Important Changes and the Impact of California Industry-Specific Minimum Wage Laws

March 1, 2024 Articles

In the ever-evolving landscape of California labor laws, the minimum wage has once again taken center stage. With the recent state-wide increase to $16 per hour, the Golden State continues to lead the nation in setting minimum wage standards. However, the latest developments go beyond a blanket increase, introducing industry-specific changes that will significantly impact certain sectors.

California’s Minimum Wage Increase

The recent increase in California’s minimum wage to $16 per hour, effective this year, reflects the state’s commitment to ensuring fair compensation for its workers. The complexity of California’s minimum wage laws is further heightened by the fact that many cities and counties have their own minimum wage regulations, making compliance a multifaceted challenge for employers.

Industry-Specific Minimum Wage Laws

Historically, industry-specific minimum wage laws were a rarity, with only a few states implementing such measures. However, recent legislative changes, particularly Assembly Bill 1228 (AB 1228) and Senate Bill 525 (SB 525), have ushered in a new era for California, introducing industry-specific minimum wage laws for fast-food chain employees and healthcare workers.

AB 1228 marks a significant departure from California's previous approach, introducing industry-specific regulations for national fast-food chain employees. Effective April 1, this law elevates the minimum wage to $20 per hour for such workers. The law applies to national fast food chains with 60 or more limited service restaurants in the U.S. that share a common branding, including at least one restaurant in California (though excludes bakeries and restaurants within grocery stores or airports). Despite its seemingly narrow scope, AB 1228 affects over half a million workers, constituting approximately 3% of California’s workforce. This increase has broader implications, potentially pressuring wages in other industries as low-wage earners may seek higher-paying opportunities.

While the initial rate is $20 per hour, there is the potential for this figure to rise annually through 2029, adding an additional layer of uncertainty for affected businesses.

SB 525 introduces industry-specific minimum wage laws for healthcare workers. The law sets in motion a trajectory that will see healthcare workers earning a minimum of approximately $25 per hour over the next few years. The complexity of this legislation is evident in the existence of five different wage schedules, contingent on the size of the healthcare facility and the nature of their payers.

Healthcare workers under SB 525 are broadly defined to include individuals working in various healthcare facilities, such as hospitals, clinics, residential care facilities, and even certain at-home health workers. Importantly, the law applies to anyone working within the facility (for example, encompassing janitors and laundry staff), regardless of their direct involvement in healthcare services.

Approximately 12% of California’s workforce falls under the purview of SB 525. While there is an exemption process outlined in the legislation, obtaining an exemption involves a challenging and meticulous procedure, requiring healthcare facilities to demonstrate their financial viability.

Employers must navigate these changes with diligence, ensuring compliance with both state and city-specific minimum wage laws. The impact of these regulations may extend beyond the affected industries, influencing wage dynamics across the state. As California continues to set new standards, employers must stay informed, adapt their practices, and foster a workplace environment that prioritizes fair compensation for all employees.

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