California and New York Set $15 Minimum Wage Precedent

By

Robert Barclay

| Apr 11, 2016

In 2014 SeaTac, Washington became the first city to enact the nation’s highest minimum wage of $15 per hour. Since then, other cities including Los Angeles have set courses to achieve the $15-per-hour standard. On the state front, however, things remained stagnant until California and New York both hiked their minimum wage to match SeaTac’s.

California’s law at a glance

On April 4th, California Gov. Jerry Brown signed a bill that will increase the state’s minimum wage requirement for employers of 26 or more employees to $15 per hour by Jan. 1, 2022. Employers with 25 or fewer employees will have to comply a year later, by Jan. 1, 2023.

Currently, California’s minimum wage is $10 per hour regardless of the size of a company’s workforce. For employers with 26 or more employees, for the next two years, a 50-cent increase will occur annually with $10.50 and $11.00 being the standard in 2017 and 2018, respectively. Each January 1 thereafter the increase will happen in $1 increments until 2022 when the $15.00 benchmark will be achieved.

For companies employing 25 or fewer employees, the requirement will occur in the same increments but with a one-year delay. The first increase to $10.50 will not occur until January 1, 2018, with $11.00 becoming the standard on January 1, 2019. From there, each January 1 will bring a $1.00 per hour increase until January 1, 2023 when the $15.00 benchmark will be met.

Under the legislation, the governor has the discretion to pause the increases, depending on economic or budgetary conditions.

New York’s law at a glance

Also on April 4th, New York Gov. Andrew Cuomo signed a statewide bill, gradually raising the minimum wage from $9 to $15 over the course of a couple years and endorsing a 12-week paid family leave program. New York’s new minimum wage law sets varying minimum wage standards according to geographical location within the state.

Minimum wage increase:

  • For large businesses in New York City employing 11 or more employees, the minimum wage requirement will increase to $11.00 beginning December 31, 2016, with subsequent $2.00 increases occurring each year until the $15 standard is met on December 31, 2018.
  • For small businesses in New York City employing 10 or fewer employees, the minimum wage will rise to $10.50 on December 31, 2016, with subsequent $1.50 increases annually until the $15.00 level is achieved on December 31, 2019.
  • For businesses located in Nassau, Suffolk and Westchester counties, the minimum wage requirement will increase to $10 on December 31, 2016 with annual $1 increases until the $15 level is achieved on December 31, 2021.
  • For businesses in other areas of the state, the minimum wage requirement will be set at $9.70 on December 31, 2016, and $0.70 annual increases will occur until a level of $12.50 is reached on December 31, 2020. After 2020 the minimum wage will be increased to a level of $15 per hour according to a schedule set at that time by the Division of Budget and the state Department of Labor.

12-week paid family leave

Once fully enacted, New York’s 12-week paid family leave policy will be the most comprehensive program on a state level in the nation. Essentially, employees will qualify for 12 weeks of paid family leave when:

    • caring for an infant,
    • looking after a family member who has a serious health condition, or
    • taking care of family matters because someone was called to active military service.

The benefit schedule will occur incrementally, with employees becoming eligible for up to eight weeks of benefits of 50% of the employee’s average weekly wage in 2018. Benefits will increase according to a set schedule to a level of 12 weeks of paid family leave at 67% of their average weekly wage in 2021.

To pay for this, New York will begin withholding a tax from employee wages to fund this increase on January 1, 2018, so there will be no cost to the employer.

Response from other states

With major states on both coasts now setting the state minimum wage bar at $15 per hour, the obvious question is: Will other states follow?

The gradual increase toward $15 thus far has eluded other states, but this week’s news creates a tremendous momentum for other states to follow. It bears noting that some states have increased their minimum wage, although not on a scale quite as aggressive.

What the increase means for employers

Employers in states or cities with minimum wage surges must pay employees according to the new laws. Increases happening on a gradual basis will need special attention, so remain diligent in keeping aware of these ever-changing requirements.

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About the Author

Robert Barclay

Robert Barclay has been the Tax Research Team Lead at Paycom since 2012, and has been instrumental in such company projects as the development of its Affordable Care Act compliance product, implementation of geolocation services and redesign of Form W-2. He joined Paycom in 2011, bringing more than 20 years of experience with the capital markets consulting practices of Ernst & Young in Memphis, Tenn., and Birmingham, Ala.; and Causey Demgen & Moore in Denver, Colo. A native Oklahoman, Barclay is a graduate of Rhodes College in Memphis, where he played football as linebacker.

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