From the Advocate

By Tara Lynn Gray 

February 2023

Hail to Those Who Carry Payroll on Their Backs

My office is planning an upcoming Policy Day, an internal review of new programs and policies impacting small businesses. As part of this exercise, our office counted approximately 46 new laws that went into effect on January 1, 2023. We decided to do this exercise because small business owners need to make sure their operations and Human Resource policies are up-to-date each year. I can tell you: it’s way more than putting up a new OSHA poster in the breakroom.

There is one bill in particular that warrants attention; this is where I’m going to deep dive this month: Senate Bill-No. 3 (SB-3) Minimum wage: in-home supportive services: paid sick days.

It’s not actually a new law; it was signed by Governor Brown in 2016. What’s new is the SB-3 mandate, as of January 1, 2023, California’s minimum wage increased to $15.50 per hour for all employers (except for those working in cities and counties where the minimum wage is higher).

I believe the increase in hourly wage is necessary in a state with the second highest cost of living in the country. (Highest is Hawaii).

A California For All must mean that workers can afford to live decently within commuting distance of their place of employment.

As the CalOSBA Small Business Advocate, thinking about this one policy reminded me of what it feels like to be responsible for other people’s livelihoods, it brought back memories of my own sleepless nights in business asking myself that heavy question: am I going to make payroll?

SB-3 increased the minimum hourly over time rate. It reached $15.00 per hour statewide by 2022 for businesses with 26 or more employees; businesses with fewer than 26 employees reached the $15.00 threshold in 2023. This year, every employee in the state who was paid $15/hour on December 31, 2023, got a $0.50 raise on January 1. (This also raises the minimum salary for exempt employees to no less than $64,480 annually.)

By the way, there are 29 California cities or counties with local ordinances that set earnings above the state minimum wage. The current highest minimum wage in the state and the country is Mountain View at $18.15/hour, according to Paycor.

Obviously, there may be some disagreement between pro-labor and pro-business camps on the question of a “fair” wage.

My office is not responsible to adjudicate the issue. And I’m not stepping into this debate. More importantly, my office is responsible to provide information, content, and resources needed for small businesses to operate their business in California. Business-owners need to understand the rules and the implications of this new phase of SB-3 implementation, including the new threshold for exempt employees, or risk a wage claim.

I also want to take this moment to remind you of how many jobs in California are supported by small businesses.

Source: United States Census Bureau, County Business Patterns, 2020

If you do the math, you see that businesses with 1-19 employees account for 86.1 percent of total businesses, 22.6 percent of jobs and 16.4 percent of annual payroll. When the legislature passed the law in 2016, the Legislative Analyst’s Office estimated that about 30 percent of California workers qualify as “low-wage workers.”

Just as many minimum-wage workers live on the edge of the volcano in California, for many micro-businesses, there is a fine line between stalling and scaling.

As the Small Business Advocate, my role is to help as many California small businesses scale as possible.

There are businesses that are constructed around a single individual – service providers like barbers, lawyers and accountants for example. But, as a general rule, if your business is not growing, then you’re stalling. If your customer demand cannot support a payroll, then you must ask yourself if you are realizing the potential of your business. Entrepreneurs plan for businesses that support growth and create assets that can be sold or value that can be inherited. That’s where entrepreneurship transmutes into economic mobility. If you are not working towards that, then you might have less of a business than a job with a boss who lacks vision…and that boss is you. As of 2019, 3,458,667 small businesses in California had no employees.

Not paying non-exempt employees on their regularly scheduled payday puts employers in violation of the Fair Labor Standards Act.

When I was in business, being sued was never the fear that made me curl up in a fetal position when cashflow got tight. Instead, I thought about the individuals I’d recruited, onboarded and worked next to every day. I thought about the rent that wouldn’t get paid, the groceries that wouldn’t be bought or maybe the child support payments that would be missed if I didn’t figure out how to cut those checks on time.

I believe without a shadow of a doubt – a belief derived during my years as a small business technical assistance provider – that the overwhelming majority of small business owners are driven by this deep-felt need to meet their obligations to their employees and understand it as a fundamental part of their business’ formula for success.

This is one of the reasons why I do the work that I do: because small business owners are our economic backbone. Their viability allows for so many other transactions, so many other life choices to be made, for their own family members and the families of the people they employ.

When you get to the point where you have a payroll for someone besides yourself – and our Small Business Centers are here to help you achieve that — you are going to have to decide for yourself, your business, and your employees: what is a fair wage? What is a wage that lets both you and your employees sleep at night? And this is one of the most human decisions you’ll ever have to make.

References:

• Minimum Wage Frequently Asked Questions (ca.gov)
• California Minimum Wage MW-2023
• Small Business Centers | California Office of the Small Business Advocate (CalOSBA)