California Overtime Bill Mirrors Current Enjoined Obama Labor Department Regulation
The Federal Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards for workers in the public and private sector. For non-exempt employees, overtime pay at a rate not less than one and one-half times the regular rate of pay is required after 40 hours of work in a workweek. In cases where an employee is subject to both state and federal minimum wage laws, the employee is entitled to the higher minimum wage.
During the Obama Administration, the US Department of Labor (USDOL) began a rule making process to update the salary and compensation levels needed for executive, administrative and professional workers to be considered exempt from the FLSA. Under the regulations adopted by the USDOL in 2016, the threshold moved from $23,660 per year to $47,476 per year. The new regulations were challenged in court and a judge enjoined the USDOL from implementing and enforcing the regulations that established this new threshold. While this decision was appealed by the Obama Administration, President Trump is unlikely to continue the appeals process, leaving the old standards remain in effect.
California’s overtime standards are similar to the federal law with some differences. For example, rather than set the salary threshold at a specific dollar amount, California law sets the threshold for exemption from overtime pay at twice that of the minimum wage. To be exempt, California workers must also meet tests regarding managerial duties and discretionary power. In 2017 the salary threshold for exemption from overtime is $41,600 for employers with 25 or fewer workers and $43,680 for those with 26 or more. This amount will rise as California’s minimum wage rises. These amounts will change to $43,680/$45,760 in 2018 and $45,760/$49,920 in 2019. By 2020, California’s salary threshold for the overtime exemption will exceed the one that had been established by the enjoined Labor Department regulations.
Introduced by Assembly Member Thurmond, AB 1565 adds Section 514.5 to the Labor Code. As drafted, AB 1565 would require an employee to earn a minimum of $3,956 a month (i.e., $47,476 a year), or twice the minimum wage, to qualify for an executive, administrative, or professional employee exemption from California overtime laws. If passed, this bill would speed up the process of meeting the salary threshold contained in the blocked federal overtime rule for all California employers, as the proposed state law does not differentiate between employers with more than 26 employees and employers with less — like the state minimum wage law does. Every employer, regardless of size, would be required to comply with the increased salary threshold by Jan. 1, 2018, if the bill passes.
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Should you have questions about California’s current or proposed overtime laws and white collar exemptions, don’t hesitate to contact leading California employment lawyers at Kingsley & Kingsley. Call and speak to an experienced California lawyer toll-free at (888) 500-8469 or click here to contact us via email.
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