California employers may remember the scramble that occurred in 2016 after the U.S. Department of Labor (“DOL”) under the Obama administration revised the regulations governing white-collar exemptions under the Fair Labor Standards Act (“FLSA”). At that time, the DOL intended to more than double the minimum salary threshold for exempt employees under federal law.
Even for well-paid Californians, this increase was going to exceed the state exempt salary requirements. Mere days before this rule went into effect, a federal judge out of Texas halted the DOL’s overtime rule, and the rule was stricken down in 2017. The DOL went back to the drawing board and unveiled its revised Overtime Rule today.
The new revised Overtime Rule, announced this morning, will adjust the minimum salary threshold for the FLSA’s white-collar exemptions. The new minimum threshold will rise from $455 to $684 per week ($35,568 annually), among other proposed changes including crediting non-discretionary payments to the threshold salary minimum and an increase to the “highly compensated employee” exemption. The proposed rule will be subject to a period of public comment and is anticipated to take effect in January of 2020.
For California employers, this rule likely has no effect on a California exempt employee’s salary because California has its own salary test that exceeds the federal standards. The California salary test for most exempt positions is two times minimum wage, multiplied by 2,080 hours. Starting in 2019, this means for employers with 25 employees or less, the current minimum salary threshold is $45,760.00, and for employers with 26 or more employees, the current minimum salary threshold is $49,920.00.
COUNSEL TO MANAGEMENT:
If you are currently dealing with concerns about meeting the California minimum salary exemption test, or if you currently fall exclusively under the FLSA rules and need counsel on implementing this change, contact the experts at Dowling Aaron Incorporated, Saqui Law Group Division.