How San Diego Businesses Can Comply With California Wages Laws

There are a lot of complications businesses in San Diego and Southern California need to keep in mind when it comes to wages and working hours  of California. These rules are governed by a complex array of statutes, regulations, precedents, and interpretations that are enforced by the California Division of Labor Standards Enforcement (DLSE). Even if you are not located in the state of California, having one employee in San Diego or other cities in California means the business will need to adhere to these regulations. In this article, we will briefly go over the core principles you need to remain compliant with to operate your business to California’s standards.

Independent Contractor vs Full Time Employee

There are three factors that the DLSE takes into consideration when they are making this distinction:

    • Do you instruct or supervise the person while they are working?
  • Can the worker quit or be discharged at any time?
  • Is the work they are performing within the scope of your regular business?

If the answer to any of these questions is a “yes”, then the state of California will view this person as an employee. That means you are required to pay employment taxes for these individuals.

Family Members
Spouses, parents, and/or children of an employer that is registered as a sole proprietor or partnership in California are generally excluded from our state’s definition of an employee. You do not have to pay wage laws for these individuals.

Interns
There are many small to large sizes companies and businesses in San Diego, CA with open internship positions. If the business is offering unpaid internship,  there are six factors that the DLSE takes into consideration when they are classifying someone as an unpaid intern:

  • Scholastic type training is provided on-site
  • Training benefits the student or trainee
  • Interns do not displace regular employees and are under close supervision
  • Employer does not receive immediate advantages from the intern’s work
  • interns are not necessarily entitled to a job after the training period
  • Understanding between intern and employer that the intern is not entitled to wages

Wage Standards

Under Labor Code Section 200, Wages are defined as “all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, tasks, piece, commission basis, or another method of calculation.” Each job title has its standard, so I recommend that you consult with a lawyer or search around to find that definition for your industry.

Fair Pay

The California Fair Pay Act requires San Diego and Southern California employers to show that any differences in pay between a man and woman doing “substantially similar” work is based on the following factors:

  • Seniority
  • Education
  • Quantity or Quality of Production

This law can also be applied to people of different races and ethnicities.

Minimum Wage
By the year 2023, all employers in the state of California will be required to pay their employees a Minimum wage of $15 an hour. The state has been increasing the minimum wage by $1 every year to help businesses gradually implement it. This is the current implementation plan for California’s Minimum Wage.

Date 25 or Fewer Employees 26 or More Employees
January 1st, 2021 $13 an Hour $14 an Hour
January 1st, 2022 $14 an Hour $15 an Hour
January 1st, 2023 $15 an Hour $15 an hour

There are some exceptions to the Minimum Wage rule:

  • Parents, Spouse or Children of the Employer
  • apprentices regularly indentured under the California Division of Apprenticeship standards
  • Outside Salesperson

Tips

Many employees of San Diego businesses are tip workers. As a business owner, you should be aware that the state of California prohibits employers from making any deductions from an employee’s tip. Employers are required to pay the full amount of the tip to the employee, no matter where the money is coming from. But an employer is allowed to institute an involuntary tip pool as long as they disperse the income across all employees that directly interact with customers. Tip pooling cannot compensate owners, managers, or supervisors, even if they interact directly with the customer.

Piece Rates
This is defined between the employee and employer before the work is started, and it must adhere to California’s minimum wage standard.

Incentive Pay

Incentive Pay can be discrete or non-discrete, but it must be included in the base pay when an employer distributes the money to the employee/s that earned the money. If an employee is discharged before the incentive pay is distributed, they can claim it in their case if it was promised and the employer never delivered.

Commission

Employees that are paid with Commission must be involved with the selling of a product or good. Employers must draft written contracts with employees that are involved with commission pay.

Deductions and Garnishments
California law prohibits any deduction from an employee’s wages that is not authorized by the employee in writing or permitted by law.

An employer can lawfully withhold Deductions from an employee’s paycheck under the following situations:

  • Required or empowered to by state or federal law
  • Authorized by the employee to cover health benefits, plans, contributions, or other amounts that are not rebates from the employee’s wages
  • Health, welfare, or pension deduction authorized by a wage or collective bargaining agreement

Organizations are permitted to make deductions from an employee’s paycheck so they can comply with bankruptcy court orders and garnishments for a child or spousal support. The amount that is withheld from an individual’s paycheck across a workweek can exceed the following amounts:

  • 25% of the individual’s disposable income for the week
  • 50% if the individual’s disposable income earnings exceed 40 times the state’s minimum hourly wage amount.

Holiday Shutdowns

This is a voluntary operation by the business, which means they are required to pay any exempt employees that cannot be reduced by days not worked. If the company provides a 90-day notice, employees can use accrued vacation time to cover the days of the shutdown.

Hours worked on holidays, Saturdays and Sundays should be treated like regular working days. California does not require employers to pay more for working these days.

Timing and Payment

Many San Diego employers and businesses pay their employees on a bi-weekly basis.  Wages earned between the 1st and 15th days of the month must be paid by the 26th day of the month. Wages earned between the 16th and final day of the month must be paid by the 10th day of the next month. An organization or business that fails to pay its employees on time can be subjected to civil penalties.

An employer can pay an employee by cash, check, direct deposit, or a payroll program.

Final Paycheck

An employee that has been laid off or terminated must be paid all of their unpaid wages immediately. The final wage payment is the official day of termination.

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