Starting in December of 2016, the minimum wage for employees paid on a salary basis that are considered exempt will increase from the current $455 minimum to $913 weekly. Exempt employees are those employees that don’t get paid for overtime work. Since the federal salary requirement is going to be higher than California’s minimum, all employers in California will be required to either increase their employees pay to the $913 per week ($47,476.00 per year) or change them to non-exempt employees and pay them for overtime.
This new regulation is going to have a huge impact on the employers in California. The USDOL (United States Department of Labor) reported that more than 10% of California salaried exempt employees, which includes more than 400,000 people, will be provided overtime pay if their salary is not increased to meet the new regulations.
The following are changes in the new regulations:
USDOL has not made any changes to any exemption requirements related to the amount of work necessary to be eligible for exempt status. This is also known as a “duties test” and the FLSA (Fair Labor Standards Act) currently requires a qualitative test that’s based on each employee’s main duty assignments.
The USDOL was requesting feedback regarding the amount of work required to be considered for exempt, but that wouldn’t make a difference to those in California because California requires a time quantitative test which means employees must be performing their exempt duties more than 50% of their working time every week.
Employers should plan for this change to go into effect in December regardless of the talk regarding some Congress members efforts aimed at stopping the changes. Employers can consider the following options in preparation for the upcoming changes:
Employers can explore these options with a legal advisor or HR consultant in combination with their financial team to help prepare for the December 1st deadline.
Employers in California might also use this opportunity to reevaluate their workforce, including re-examining exempt positions within the company to confirm the positions are classified appropriately depending on the specific exemption category.
PAYDAY Workforce Solutions provides a single database SAAS solution for Human Capital Management (HCM) including payroll, human resources, time management, benefits administration and onboarding to companies of all sizes and in various industries.
625 The City Drive South, Suite 250
Orange, CA 92868