The New Overtime Rule: Different for California Employers

As most of us know by now, new Department of Labor rules are scheduled to become effective December 1 of this year that will increase the minimum weekly salary requirement for Administrative, Executive, and Professional exempt employees from the current $455 per week to $913 per week. However, certain aspects of the new federal rule will not apply to organizations with California employees, and it’s important that employers are aware of them.

The new federal rule will allow employers to use non-discretionary bonuses, incentive payments, and commissions to satisfy a portion (up to 10 percent) of the new salary requirement. However, California law does not allow such payments to be used to meet the salary test, so this change does not affect employers with California employees.

Also, under federal law, certain “highly compensated” employees can be exempt by performing one or more of the exempt Administrative, Executive, or Professional duties, and receiving total annual compensation of at least $134,004 per year, effective December 1 (an increase from the current $100,000 annual salary threshold). Not so in California, which does not provide for a highly compensated employee exemption.

One final note to keep in mind: If you increase salaries to meet the weekly salary threshold, you must do so for the entire workweek that includes December 1, 2016. So, if your designated workweek is Monday through Sunday, then you need to increase salaries effective Monday, November 28, 2016.