Federal Rule re: Exempt Employee Salary is Law

As widely expected, (See “Boss Law, Edition 1, Vol 1, March 15, 2016) the new Federal Rules for exempt employees have been issued by the Department of Labor, effective December 1, 2016. The so-called “white collar exemption” allows for employers to pay some employees on salary (instead of hourly) and avoid overtime, meal and rest break and other paperwork requirements as long as those employees’ duties fall under professional, executive or administrative exemptions AND they are paid a minimum salary. For most California employees, that minimum salary has been twice the state’s minimum wage (translates to annual salary of $41,600 or $800/week). Until this new rule, the federal minimum was much lower, so most exempt employees in California were subject to the California limits.

NOW, the federal minimum salary has been increased to $913 per week ($47,476 per year) making that higher than California and therefore requiring all employers in the country to apply the higher threshold.

That amount will also adjust according to a formula every three years. In 2020, the annual salary is expected to go to approximately $51,000 if projections hold

FAQs re: DOL Rules for Exempt Employees

1. What Employers Are Affected?
All employers, having a single exempt employee.

2. Can bonuses or commissions be applied to reach the $47,476 annual salary?
Yes. Employers can count bonuses, commissions or other incentive payments for up to 10% of the salary threshold as long as they’re paid at least quarterly. If the employee does not earn enough of a bonus or commission in a given quarter to meet the minimum salary level, an employer may make a “catch-up” payment no later than the next pay period after the end of the quarter. Any such “catch-up” payment counts only toward the prior quarter’s salary.

What Should I Do to Prepare for the Change?
– Determine if employees currently classified as “exempt” will still qualify under the new rule.
– Consider options for compliance, including reclassifying currently “exempt” employees as “non-exempt;” OR
– Increase salaries to bring exempt employees above the new minimum.
– Develop a plan to implement changes.
– Communicate with affected employees.

Questions? Call us: (805) 225-1773

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