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By now, nearly all California employers are probably aware of the minimum wage increase that began just weeks ago on January 1, 2018, but employers should be diligent in determining how many workers qualify as employees because the number of employees determines the wage rate the employer must use in paying its employees.

Currently, the minimum wage has increased by 0.50 cents from $10.50 to $11 per hour for employees of employers with 26 or more employees. Check out the history of California’s minimum wage. In other words, the minimum annual salary for exempt employees (i.e. executive, administrative, or professional) has increased from $43,680 to $45,760.

At the same time, for employers with 25 or less employees, the minimum wage increased by 0.50 cents from $10 to $10.50 an hour. For exempt employees, their minimum annual salary has increased from $41,600 to $43,680.

A schedule has been set for yearly minimum wage increases from 2017 through 2023, when the minimum wage for all employees will be set at $15.00 an hour- regardless of how many employees are employed by the employer.

Because the courts have long held that the minimum wage laws are construed in a way most favorable for the employee and that the laws are set in place for the protection of the employees, employers should be inclusive and err on the side of caution when determining whether or not a person counts as an “employee.” This law does not limit who qualifies as an employee and a worker will be included, regardless of whether or not they are exempt from overtime (i.e. executive, administrative, or professional employees), the number of hours they worked, or location.

Moreover, the penalties and interest incurred in failing to pay the higher wage rate could end up being more costly for the employers. As such, all employers should try to make a reasonable and good faith determination in determining the number of employees. Remember: the labor code statutes are meant to protect the employees – not employers.