July 11, 2016

By Gordon E. Bosserman

gbosserman

In May 2016, the U.S. Department of Labor announced the highly anticipated Federal overtime rule changes under the Fair Labor Standards Act. Many employers have asked whether there is anything they need to do to comply with the new Federal rules. This is possibly the only time I will ever tell anyone that it is a good thing to be a California employer.

If an employer is already complying with Wage and Hour Laws in California, it is already complying with most of the new Federal rules. The one possible exception arises out of the “white collar exemption.” Under California and Federal law, an employee to whom the exemption applies must be salaried, and his or her salary must be at least two times minimum wage.

The minimum salary computation for a white collar employee under California law is as follows:

• California minimum wage = $10.00/hour

• Number of hours a full-time employee works in a week = 40

• Number of weeks in a year = 52

• Number of hours a full-time employee works in a year = 40 x 52 = 2,080

• Minimum annual salary for a full-time exempt employee beginning January 1, 2016 =$10.00 X 2 = $20.00 X 2,080 = $41,600

• Minimum monthly salary for a full-time exempt employee beginning January 1, 2016 =$41,600 / 12 = $3,466.67

On December 1, 2016, the minimum salary computation for a white collar employee under Federal law will increase to $913.00 per week, $3,652.00 per month, and $47,476.00 per year. Because the Federal salary threshold will be higher than California’s salary threshold, an employee will need to meet the Federal salary threshold in order to be classified as exempt under both California and Federal law. To be safe, an employer must always meet the requirements of the stricter law, including California’s stricter duties, tests and rules. In addition, based on legislation passed in California in April 2016, California’s minimum wage will gradually rise to $15.00 per hour in the year 2021. This will further complicate the foregoing discussion.

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