California repeals subminimum wage rates. On September 27, 2021, California repealed an arrangement that allowed employers to pay salaries below the state’s minimum wage rate. These rates are paid to workers who are mentally or handicapped, or both. The repeal will go into effect on Jan. 1, 2022.

Subminimum Wage Licenses

Currently, state law allows employers to obtain special licenses. These licenses in turn allow them to pay less than the minimum wage to some disabled workers. The licenses are normally valid for up to one year. However, nonprofit employers, such as sheltered workshops and rehabilitation facilities, may receive a general license. This permits them to employ disabled staff members at subminimum wage rates.

As a result, the Department of Industrial Relations will stop providing new subminimum wage licenses on January 1, 2022. Employers with existing licenses may be allowed to renew existing licenses under limited conditions.

Nonprofit organizations will continue to enjoy an exception. California will allow them to pay subminimum wage rates to employees with disabilities without requiring individual licenses up until January 1, 2025. These nonprofit organizations might include sheltered workshops and rehabilitation facilities.

A phaseout plan is to be implemented. The bill also requires the State Council on Developmental Disabilities to develop a multiyear phaseout plan. This will plan for subminimum wages for workers with disabilities to stop by January 1, 2025. The phaseout plan should be created in consultation with stakeholders and relevant state agencies,

California Repeals Subminimum Wage Important Dates

Jan. 1, 2022

California will stop issuing new licenses for subminimum wages for employees who are mentally or physically disabled, or both.

Jan. 1, 2025

All employers in California will be required to pay employees wages at or above the minimum wage rate, no matter their psychological or physical disability.

Effect on Employers

Organizations that employ individuals with disabilities must evaluate these changes to the California Labor Code. In addition, they should monitor future instructions from the Department of Industrial Relations. By extension this will allow them to learn more about the multiyear phaseout plan.

After reading about California’s future multiyear phaseout plan you may still have many questions. We want to help! Just reach out to a TPG Services Specialist by calling 909.466.7876 today and we’ll be there to assist. Also, have you checked out our Payroll Calculator? Check out this practical feature on our website now!