In Rob Boonin’s post below, he summarizes the U.S. Department of Labor’s proposal to change the regulations governing the so-called “white collar” overtime exemptions for executive, administrative, and professional employees under the Fair Labor Standards Act (FLSA).
As Rob mentioned, the proposed changes are expected to have little impact in California and some other states, because some of the salary thresholds for white collar exemptions under state law are higher than the proposed new FLSA salary threshold, and to be exempt from overtime under both the FLSA and state law an employee must satisfy both the federal and state exemption requirements in full.
Employers with California employees should be aware that the California white collar exemptions differ in other important respects. Below is a summary of the most important ways in which the FLSA and California white collar exemptions differ.
California’s salary threshold for white collar exempt employees is set at twice the state minimum wage for a 40-hour work week. Under the current $12 state minimum wage for employers with 26 or more employees, California’s salary threshold is $960 per week ($49,920 per year). California’s minimum wage for employers with 26 or more employees is set to increase according to the following schedule, and by doing so cause corresponding increases in the salary threshold for white collar exempt employees:
Effective Date Minimum Wage Salary Threshold
January 1, 2019 $12.00 per hour $960 per week / $49,920 per year
January 1, 2020 $13.00 per hour $1,040 per week / $54,080 per year
January 1, 2021 $14.00 per hour $1,120 per week / $58,240 per year
January 1, 2022 $15.00 per hour $1,200 per week / $62,400 per year
No Use of Incentive Pay
Unlike the proposed new FLSA exemption rules recently announced by the DOL, California does not allow employers to include bonuses or commissions to satisfy the salary threshold.
No Exemption for Highly Compensated Employees
California does not have a separate threshold for “highly compensated employees.”
More Stringent “Duties” Test
Unlike the FLSA, California’s “duties” test requires exempt employees to spend a majority of their working time performing exempt (as opposed to nonexempt) work consistent with the exemption under which they are classified.
To avoid liability for unpaid overtime arising from employee misclassification, employers should ensure their white collar exempt employees satisfy all the exemption requirements under both federal and state law.
Paul, Plevin, Sullivan & Connaughton LLP – San Diego, CA