Per SB 3, in California the minimum wage is set to increase each year reaching $15 per hour by 2022 for employers with 26 or more employees and 2023 for employers with 25 or fewer employees. Thus, effective January 1, 2020, employers with 26 or more employees will be required to increase minimum wage to $13 per hour and employers with 25 or fewer employees will pay minimum wage employees $12 per hour.

Overtime rates for minimum wage employees will increase to $19.50 for time and one half for employers with 26 or more employees and $26.00 for double time. For employers with 25 or fewer employees, the overtime pay rate for time and one-half will be $18 per hour or $24 per hour for double time.

Due to the minimum wage rate change, the classification of exempt and nonexempt employees is also affected. For an employee to qualify as exempt, the employee must meet the salary-basis test, earning two times the state minimum wage for full-time employment. Therefore, effective January 1, 2020, the minimum salary threshold for exempt classifications of employers with 26 or more employees will be $54,080 annually. For employers with 25 or fewer employees, the minimum salary rate will be $49,920. While the aforementioned is in regards to salary requirements, keep in mind employees must also meet all other legal requirements for exemption.