New California Legislation to Boost Salary Level for Overtime Exemption

The minimum salary to qualify for the traditional “white collar” overtime exemptions (administrative, executive, professional) in California has been higher than that required under federal law for many years. Because California’s exempt salary threshold is tied to the state minimum wage (an exempt employee generally must earn a salary of at least two times the state minimum wage), the salary floor goes up as California’s minimum wage goes up. The current minimum salary for exempt executive, administrative, or professional status in California is $43,680 per year (under the current minimum wage of $10.50).

As most employers know, last year the federal Department of Labor enacted regulations increasing the minimum salary to qualify for exempt status under the federal Fair Labor Standards Act (“FLSA”) to $47,476 per year. California employers would have had to comply with the higher salary threshold under the FLSA, except that the regulations were blocked by a Texas court late last year. The Texas court’s ruling is now on appeal, but at this point most WHDI members believe that the overtime regulations will not be reinstated — at least in current form — under the Trump administration.

California is now seeking to accomplish what the Obama administration could not accomplish at the federal level, by proposing to raise the minimum annual salary to qualify for exempt status in California to $47,472. AB 1565 (Thurmond) recently passed through the California Assembly’s Labor and Employment Committee. Under the bill, the minimum salary for exempt executive, administrative, or professional workers would be $47,472 or twice the state minimum wage, whichever is greater. As California’s minimum wage continues to rise, a salary of twice the state minimum wage eventually will be a number greater than $47,472. Until that time, $47,472 would be the minimum salary for exempt status in California if this bill is enacted. Our California WHDI members certainly believe that this bill has a reasonable chance of being passed and signed by Governor Brown, so employers with California employees should keep an eye on AB 1565.

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