Whether an employee is considered exempt or non-exempt depends on the employee’s salary and their duties. In California, an employee will be classified as a non-exempt employee for purposes of California overtime laws, regardless of their duties, if they earn an annual salary less than two times the minimum wage (currently $41,600 per year). In addition to this salary requirement, there is a duty requirement that must be satisfied to be classified as exempt.  Generally, if the duties require the employee exercise discretion and independent judgment in performing their job the employee can be considered exempt, but the rules governing the duties test are a topic for a future post.

New federal regulations are coming that impact the “white collar” exemptions (e.g. administrative and executive exemptions) for federal overtime law purposes (hours worked over 40 in one work week).  Effective December 1st, to utilize the white collar exemptions, an employee would have to make a minimum salary of $47,476.00 per year to be considered exempt for purposes of federal overtime laws.  The new rule also provides that the salary threshold will be revisited every three years, to see if adjustments need to be made.

Keep in mind that California minimum wage is set to increase over the next five years, and if no changes are made to the new federal regulations, California will again surpass the federal minimum salary threshold on January 1, 2019.  But for now, employers should review their salaried employees’ compensation plans, and determine whether they need to be re-classified as non-exempt for federal overtime purposes on December 1st.

 


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