Minimum Wage and Overtime Changes for Salaried (Exempt) Employees in California
The minimum wage rules for salaried (exempt) employees in California are changing on January 1, 2020. The labor department estimates the direct impact of the new rule will now make 1.3 million employees eligible for overtime. This change is expected to hit the retail and restaurant sectors hardest.
A salaried (exempt) employee is defined by white-collar exemptions and executive-administrative-professional exemptions. This means that they are exempt from minimum wage, exempt from overtime, and exempt from some record-keeping requirements. There are three basic requirements to be considered exempt:
The employee must be paid at least $455 per week (or $684 per week starting January 1, 2020);
The employee must be paid on a “salary basis”, which is defined as guaranteed pay that does not fluctuate based on quality or quantity of work performed; and
The employee must perform the job duties required for the exemption being sought (this is where an attorney’s help may be needed to identify the appropriate exemption if any).
In addition to the increased weekly pay requirement, the employer can now meet the second requirement by satisfying up to ten percent (10%) of the $684 per week minimum salary through incentive compensation, sales commissions, and non-discretionary bonuses. There are no changes to the third, job duties requirement.
As such, employers should prepare for the changes by focusing on currently salaried (exempt) employees to ensure that they will meet the new requirements by January 1, 2020. If they do not meet these requirements, then employers should either consider a salary increase to reach the minimum or consider reclassifying the employee as hourly (non-exempt). For new employees intended to be salaried (exempt), it is important to ensure at the outset that the employee can be properly classified as such using the tests above.
It is important to note that doctors, lawyers, and teachers do not have to meet the minimum salary level and do not have to be paid on a salary basis.
This area of law can be very fact-specific and oftentimes a bit gray. Reaching out to an attorney is the best way to ensure compliance with the new rules coming into effect in the new year. Feel free to reach out to the Parkman Law Firm today.
This article is purely for educational purposes, and nothing herein is intended to form an attorney-client relationship. Only a signed retainer and/or engagement agreement with us will form such a relationship. However, for questions or concerns regarding the contents of this article, feel free to schedule a free consultation.