Paying employees higher wage is a hot topic in politics. Both local and federal officials are calling for higher minimum wages for employees, spurred on by movements like Occupy Wall Street. California always trying to be a leader in employee rights is raising its minimum wage to $10.00 in 2016. Moreover, some cities in California have separate higher minimum wages, such as San Francisco where the minimum wage is $12.25.
Now the U.S. Department of Labor ("DOL") wants to raise the rate of pay for exempt employees. Employees are either classified as exempt or non-exempt. If an employee is non-exempt they are entitled to be paid overtime, along with other regulations on their work hours. If an employee is classified as exempt they are paid a straight salary. However, an employer cannot arbitrarily determine an employee should be exempt, both the federal government and the State of California have strict requirements for which employees can be designated exempt. There are several types of exemptions; however, one of the most common is the executive exemption.
Under Federal law in order for an employee to qualify for the Executive Exemption they must meet the following criteria:
Under the California Executive Exemption, employees must meet the following criteria:
Currently, California's exemption requirements are obviously higher than the Federal government's requirements. However, under the proposed rule revisions by the DOL would surpass California's requirements, namely in the amount of salary paid. The DOL has proposed that the minimum salary for the Executive Exemption be raised. The proposal suggests a test that the minimum requirement would be set at the 40th percentile for weekly earning for full-time salaried workers. The estimate for 2016 by the DOL is $970 per week or $50,440 annually. This would mean California's salary requirement would no longer be sufficient, even when the California minimum wage is raised to $10.00 in 2016.
The proposed revisions are not yet final. The DOL is accepting comments of the proposed rule changes untilSeptember 4, 2015. After the comment period, likely in early 2016, the revisions will be implemented, if they are adopted as proposed. If the revisions are adopted, California employers must consider whether to give employees raises to meet the new standard or switch certain employees to non-exempt (hourly) employees.
The public can comment on the proposed revisions at the following website:http://www.regulations.gov/#!docketDetail;D=WHD-2015-0001