Client Alert: Updated Federal Overtime Rules Will Affect California Employers

May 25, 2016

Last week, the U.S. Department of Labor announced its long-awaited final rule on overtime pay. The new rule takes effect on December 1, 2016 and significantly raises the minimum salary threshold an employee must receive to be exempt from overtime pay.  Because the new federal salary threshold is higher than the current state minimum salary threshold, California employers will be affected.

 

Key Points of the Final Rule
  • Raises the minimum salary threshold for exempt employees to $47, 476 per year, or $913 per week. This is more than double the current federal threshold of $23,660 per year, or $455 per week.

  • The new salary threshold is higher than California’s current minimum salary threshold of $41,600 per year and California employers will therefore be required to pay their exempt employees at least $47,476 per year to maintain their exempt employee status. Failure to pay the minimum salary will result in the employee being entitled to overtime pay for overtime hours worked.

  • Becomes effective December 1, 2016.

  • The minimum salary will be adjusted every three years, with the first adjustment to occur on January 1, 2020

  • There are no changes in the “duties test” for exemptions under the final rule. An employee must meet both the “duties test” and the minimum salary threshold to be exempt from overtime.

 Conclusion

Employers should make sure their employees are properly classified and should begin to plan for the new overtime salary requirements prior to the December 1, 2016 effective date.  If you have questions regarding the new requirements or if you have questions as to whether you have properly classified your employees, please do not hesitate to contact me at my office, or email me directly at slee@mwgjlaw.com.

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