Stop the presses!
Although the Department of Labor has “strongly disagreed,” that did not stop a federal judge in Texas from issuing an injunction to halt the new federal overtime rules that were to kick in on Dec. 1.
The injunction is a temporary suspension to the regulation. The judge will still need to make an official ruling, however it seems he has already “showed his hand” and is likely to uphold his original decision.
The last significant change to the minimum exempt salary limit was 12 years ago in 2004. We often think minimum wage is only for non-exempt hourly workers, but there is a minimum wage for professional “white collar” workers, as well. Generally speaking, someone who is on a straight salary would have to make two times the minimum wage in order to be considered “exempt” from overtime. If the new federal overtime rule eventually is upheld, this will no longer be the case.
To complicate matters, The New York Times reported that many large employers have already raised the pay of some employees to comply with the new $47,476 rule. Paying the increased minimum salary would be far more cost-effective than having to pay overtime to those employees. I can’t imagine any company reversing a pay raise because of this injunction, but only time will tell.
So what does this mean for California employers?
California’s new minimum wage will still increase to $10.50 on Jan. 1, 2017. Employers should continue using the California-based salary test to determine the appropriate classification for their executive, administrative and professional employees. Remember: To maintain an exempt classification, the minimum monthly salary should be at least two times the state minimum wage for full-time employment — $3,466.67 per month for 2016, increasing to $3,640 per month in 2017. Up to 10 percent of the income may come in the form of quarterly non-discretionary bonuses, incentive pay or commissions. Passing the salary test is just a small portion of the exemption test requirements; California employees must also meet a strict duties test to be classified as exempt.
Questions about the new rules — or what to do during this time of injunction? Contact us.