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Minimum Wage Laws for Small and Medium-Sized Manufacturers [Effective January]

Posted by Steven Brand

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California is home to nearly 7 million hourly workers, nearly one-third of which earn minimum wage. With the resulting implementation of Senate Bill No. 3 (SB3), which was signed into effect by Governor Jerry Brown on  April 4, 2016, California will become the first state in the nation to require manufacturers and other employers to increase the minimum hourly wage for employees to $15 by 2022.

This will have a substantial impact on budgets and overhead for enterprises of all sizes, but in particular for small and medium-sized manufacturers (SMMs) and businesses.

As a result of this bill, large businesses, which are defined, in this case, as those employing 26 or more workers, began complying with the legislation in 2017. Small businesses, which are defined as those which employ 25 or fewer workers, were granted a one-year delay, meaning that the first step in the minimum wage increase will take effect on January 1, 2018. Small businesses have until 2023 to fully implement the wage increase to $15 per hour.

But what do these changes mean for your small or medium-sized manufacturing business in the meantime? Let’s explore the impact of this legislation on your company and how you can prepare to meet the mandated requirements. We have put together a few helpful tips to ensure your business stays on track and is compliant with the law.

New Minimum Automatic Wage Rollout

The following wage increases are scheduled to roll out each year on January 1:


Large Employers

Small Employers


$10.50 per hour

$10 per hour (current rate)


$11 per hour

$10.50 per hour


$12 per hour

$11 per hour


$13 per hour

$12 per hour


$14 per hour

$13 per hour


$15 per hour

$14 per hour


$15 per hour (continues)

$15 per hour

It should be noted that the California governor has the power to suspend any increases based on specific budgetary and economic conditions between 2017 and 2023. This discretionary “off-ramp” provision to halt scheduled increases is only permitted to occur twice.

What Else You Need to Know

Overtime rates for minimum wage employees will be affected by these legislative changes.

Effective January 1, 2018:

  • For large employers, overtime rates will increase to $16.50 per hour for time and one-half, and to $22 per hour for double-time.
  • For small employers, the rates will increase to $15.75 and $21 per hour, respectively, for those same work time requirements.

The end result of these increases means that annual salaries for minimum wage employees will grow more than 36% for workers at large organizations and nearly 43% for employees at small organizations — increasing to $45,760 and $43,680, respectively — between January 1, 2018 and January 1, 2023.  

Notices About Minimum Wage Changes Must be Posted

To be in compliance with state workplace posting obligations, all California employers must display and/or provide the following information for employees. (Workplace postings are typically made available at no cost from the State of California Department of Industrial Relations.)

  1. The Minimum Wage Order (MW-2017) must be posted in areas frequently visited by employees, such as employee break rooms, where the information can easily be read during an ordinary workday.
  2. A written, itemized wage statement must be provided to every employee concurrently when his or her wages are paid.*
  3. A written wage notice must be provided to non-exempt employees at the time of hire and again within seven calendar days after any changes are made to the notice.**
  4. A notice must be given to all employees whose wages are affected by the January 1, 2018 minimum wage increase by no later than January 7, 2018.

* Source: Labor Code 226

** Source: Labor Code section 2810.5

Local Government Wage Variations

It is important for all California employers to be aware of any additional factors, such as local city or county ordinances, that may affect the state minimum wage obligations. SB3 does not prevent local municipalities from enacting their own minimum wage requirements that may be higher than that set by the state, so all employers must closely monitor the local minimum wage rates because they may change.

For more information about the phase-in requirements and to answer some frequently asked questions, check out the State of California Department of Industrial Relations FAQ web page

Minimum Wage Laws for Small and Medium-Sized Manufacturers 

Topics: Manufacturing, Minimum Wage Laws

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