Major Employment Law Updates in California for 2025 Series
With a new year rolling around, it is time for employers to read up on the latest employment law updates in California. Wage and hour laws are getting refreshed, with changes to California’s minimum wage. Certain AB 5 exemptions will finally sunset, and disabled workers will be given minimum wage for their work.
As an employer, you can face fines and penalties if you don’t adapt to the new regulations. Unfortunately, this upcoming year can be especially challenging because so many laws are slated to take effect in California. To make navigating California’s flood of new HR laws a little easier, we’ve compiled a four-part series on all of California’s major employment law updates that are taking place in 2025.
Major Changes to Wage and Hour Laws in California
Starting in 2025, California has a range of different changes taking place to wage and hour laws in the state. The following are the most important updates to wage laws that your small business needs to know.
California Minimum Wage Increases
On January 1, 2025, California is getting an update to its minimum wage. The minimum wage will be increasing from $16.00 to $16.50. Because California’s exempt salary level is pegged to the minimum wage, this also means that the minimum salary threshold will be increasing to $68,640.
Employers are obligated to post a Minimum Wage Order and Wage Order in the workplace. As an employer, you are also required to put the worker’s wage rate on their page stub. Additionally, it’s important to remember that even piece-rate workers must be paid at least the minimum wage.
California Fast Food Minimum Wage Is Adjusted for Inflation
On April 1, 2024, California increased the minimum wage for fast food workers to $20. While this wage is still at $20, it is likely that it will change in the future. The Fast Food Council can decide to increase the minimum wage for fast food workers if the U.S. Consumer Price Index goes up. The U.S. Bureau of Labor Statistics’s next meeting to determine the price index will be on January 15, 2025, so it is likely that the Fast Food Council will have a chance to determine wage increases in January 2025.
California Sunsets Independent Contractor Exemptions for Certain Workers
When it was first enacted several years ago, AB 5 created a test for whether someone should count as an independent contractor or an employee. AB 5 was originally signed in September 2019. However, certain exemptions were extended until January 1, 2025, to give construction trucking subcontractors and manicurists time to adjust to the new law. However, these exemptions will sunset in the new year, so previously exempt industries will need to abide by AB 5.
California Extends ABC Test Exemption for Newspaper Distributors and Carriers
When Gov. Gavin Newsom signed AB 1561 in 2021 to extend AB 5 exemptions, AB 1561 also included provisions for newspaper distributors and carriers. Under AB 5, the ABC test determines if someone is an independent contractor or not based on the level of employer control, the type of work performed, and whether they are customarily engaged in an independent occupation.
Newspaper distributors and carriers were previously exempted from the ABC test. Now, this exemption has been extended to 2030. This decision reflected the fact that many newspaper carriers work with multiple companies, so it would inhibit their ability to work.
California Repeals Subminimum Wages for Workers With Disabilities
Starting on January 1, 2025, workers with disabilities must be paid California’s minimum wage. On a national level, the Fair Labor Standards Act (FLSA) allows disabled workers to be paid less than minimum wage. However, there are certifications and other requirements that must be met before this can be done.
In a review of the law, the United States Department of Labor (DOL) found that 14% of disabled workers were paid less than $1 an hour. More than half were paid less than $3.50 per hour. As a result, the DOL has proposed a rule to end the sub-minimum wage for disabled workers. If the proposed rule is enacted, the rest of the country will join California in banning subminimum wages for workers with disabilities.
California Minimum Pay for Overtime-Exempt Computer Professionals and Physicians & Surgeons Paid an Hourly Rate Is Adjusted for Inflation
Under California law, employees who work in the software field, licensed physicians, and licensed surgeons can be exempt from overtime laws as long as they are paid a minimum hourly rate. Starting on January 1, 2025, the minimum hourly rate for these workers will be going up in order to keep up with inflation.
For computer software employees, the exemption threshold will be $56.97 per hour. This works out to a minimum monthly salary of $9,888.13 per month. Meanwhile, the hourly rate for licensed physicians and surgeons will be increasing to $103.75.
Learn More About Changes to California’s Employment Laws
Many employment regulations will be changing in 2025. To ensure your company is protected, you need to stay up to date about major updates to wage and hour laws. With the right knowledge and support, you can avoid penalties and make sure your company is compliant.
If you want to stay on top of California’s changing employment laws, reach out to our team of small business HR and payroll experts today.