The new rate applies to all employers regardless of size and covers every adult and minor employee who works at least two hours in a given week within city limits, according to the City of Pasadena.
For owners scrambling as the first affected pay period hits, the danger is hidden cost implications. A worker paid $18.57 actually costs an employer roughly $21 to $24 once payroll taxes, workers’ compensation and insurance are added, he said. That 15% to 30% “labor burden,” he said, is what often catches small businesses off guard.
Cash flow is the next trap, according to Zhen. He advised owners to model their quarterly payroll at the new rate but to budget the employer tax liability separately. Wages go out immediately, but the taxes come due later, Zhen said, and failing to plan for that timing gap can ruin cash flow.
The most common mistakes are procedural, Zhen said. The biggest blind spots, according to him, are forgetting to update payroll software before July 1, failing to recalculate overtime at the higher rate, and incorrectly misclassifying employees as 1099 contractors.
Employers must also navigate overlapping wage floors.
Pasadena sits at $18.57, the state minimum is $16.90, and California’s fast-food standard is $20, Zhen said. The rule, he said, is simple: the highest rate wins. Pasadena employers must pay $18.57 unless they fall under the state’s fast-food mandate. That state fast-food rate, set at $20 per hour since April 1, 2024, supersedes the local ordinance for businesses that meet California’s definition of a national fast-food chain, according to the City of Pasadena.
Beyond the math, the city imposes specific compliance steps which muxst be followed.
Employers are required to post the official Pasadena notice in a conspicuous location where employees can easily read it, in English and any other language spoken by 5% or more of staff, according to the city. Tipped employees must still be paid at least the full $18.57 before tips. Owners should also confirm whether any worker logs at least two hours per week inside Pasadena, since that alone triggers coverage.
Zhen’s broader counsel is that small teams have no room for error. He recommended using a reputable payroll provider to handle the compliance math, auditing the setup before close of business on July 1, and adjusting prices to customers now if needed to offset the higher costs.
He also advised documenting every step taken before July 1, along with complete payroll records and written notices, in case a complaint surfaces later.
The stakes are not trivial. Penalties for violations can include criminal prosecution, and the ordinance carries a 90-day window that shifts the burden to employers in retaliation claims, according to the City of Pasadena.
The city’s Code Compliance Division administers the ordinance and coordinates enforcement with the California Division of Labor Standards Enforcement. Workers with questions or complaints can contact Code Compliance Manager Jon Pollard at (626) 744-6831, according to the city.
Angel Zhen is a certified public accountant whose practice is located in Old Pasadena.
Get our daily Pasadena newspaper in your email box. Free.
Get all the latest Pasadena news, more than 10 fresh stories daily, 7 days a week at 7 a.m.
