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Bracing for Impact if California Voters Approve Statewide Minimum Wage Increase

By Stacey James, Laura Hayward, and Sebastian Chilco

October 10, 2024
4 minute read

At the November 5, 2024 election, California voters will determine the fate of Proposition 32, which proposes to increase the state minimum wage and provide for automatic future adjustments tied to inflation. While the outcome of this ballot measure is uncertain, because of the near-immediate impact this could have on some employers, and the numerous employment standards a statewide minimum wage increase could affect, it is important for employers to be aware of its potential effects now to avoid late-year scrambling that might be necessary should the measure pass. (Based on recent polling, success is not guaranteed, which is rare for minimum wage ballot measures.¹)

When The Changes Could Take Effect. Per article II, section 10(a) of the California Constitution, because Proposition 32 does not establish when it will take effect, the changes could take effect on the fifth day after California’s Secretary of State certifies election results, which is currently scheduled to occur on December 13, 2024. Accordingly, this could create new, higher minimum wage rates that would apply for a few weeks during the tail end of 2024. On December 18, 2024, the minimum wage would rise to $17 for employers with 26 or more employees and rise again to $18 on January 1, 2025. The minimum wage for employers with 25 or fewer employees would rise to $17 on January 1, 2025, and to $18 on January 1, 2026. Thereafter, the $18 minimum wage would be adjusted annually, effective January 1, to account for inflation, and apply to all employers.

Changes Could Affect More than the Minimum Wage. In California, there are a lot of standards that are pegged to the state minimum wage that could be affected, including but not necessarily limited to:

The rate under a local minimum wage ordinance.
The minimum amount of pay for executive, administrative, or professional employees to be exempt from overtime and minimum wage requirements, including for health care workers.²
The minimum amount of pay for commission-earning employees to be exempt from overtime requirements.
A wide variety of state laws contain a wholesale or partial exemption for employees covered by a collective bargaining agreement that, among other requirements, expressly provides for a regular hourly rate of pay that is at least 30 percent more than the minimum wage.
Whether employers must pay a premium for split shifts worked by non-exempt employees, and the amount thereof.
The floor for any reporting time pay potentially due non-exempt employees.
The minimum rate of pay a non-exempt employee must be paid to potentially relieve an employer of its obligation to reimburse the employee for certain required tools or equipment.
The amount of pay that might be due for paid rest breaks for employees paid on a piece-rate basis (if the minimum wage is higher than their average hourly rate).
The amount of credits toward payment of the minimum wage for meals and lodging.
The subminimum wage for certain learners.

Next Steps. The election is less than a month away, and results are expected to be certified shortly thereafter. Accordingly, employers with California employees should consider whether and how a potential increase to the state minimum wage during the last part of 2024 and in future years might impact them, including their labor budgets and the exempt status of their workforce.

¹ See, e.g., Mackenzie Mays, New poll shows most California voters want to see tougher punishment for theft, fentanyl crimes (Los Angeles Times Aug. 16, 2024) (“Likely voters also support Proposition 32[], with 52% inclined to vote ‘yes,’ according to the poll, and 34% intending to vote ‘no.’ The remaining voters polled are undecided.”). See also Mark Baldassare, Dean Bonner, Lauren Mora, and Deja Thomas, PPIC Statewide Survey: Californians and Their Government (Public Policy Institute of California Sept. 2024) (“Likely voters are divided on this citizens’ initiative, with 50 percent saying they would vote yes and 49 percent saying they would vote no.”).

² If Proposition 32 passes and is enacted in 2024, the minimum salary for executive, administrative or professional employees who work for an employer with 26 or more U.S. employees would increase from the current $1,280 per week ($66,560 annual) to $1,360 per week ($70,720 annual) for the rest of 2024. Effective January 1, 2025, these amounts would again increase to $1,360 per week ($70,720 annual) for employers with 25 or fewer U.S. employees and to $1,440 per week ($74,880 annual) for employers with 26 or more U.S. employees. For certain health care employers, an executive, administrative, or professional employee must be paid a salary of no less than 150% of the health care worker minimum wage or 200% of the general minimum wage for full-time employment, whichever is greater.