by Shannon Walpole
California has been a hotbed for overtime exemption misclassification litigation for years. Not much will change for California employers with the passage of the new overtime rules by the Department of Labor. That said there are three critical things about the new federal rules that all California employers should know:
1. The new rules are effective December 1, 2016.
2. Effective December 1, 2016, all exempt employees must make at least $47,892 per year (vs. $41,600 required by California law). Of note, for purposes of the federal rules, this can include up to 10% of pay in the form of a non-discretionary bonus. If any of your exempt employees don’t currently make this much annually, you will need to increase their annual salaries or convert them to non-exempt by the end of November. There are advantages and disadvantages to both. The more employees impacted the more complex the analysis. Don’t forget to factor as part of any analysis all potential consequences for converting employees to non-exempt including for example the need to provide meal and rest periods to impacted employees and also whether “off duty” work will be a problem (e.g. pre and post shift work, remote access to emails, off-hour calls, etc.).
3. The federal salary threshold for exempt employees will now be adjusted every three years. Unlike the California salary threshold that changes with the minimum wage, the federal salary threshold is not something that historically employers have had to review with any regularity. The federal salary threshold has only been adjusted eight times in 75 years, and only once since 1978. Going forward California employers will have to keep an eye on both the state and federal salary thresholds to ensure compliance.
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.