As has been widely reported in the past few weeks, the new federal overtime rule, which was supposed to become effective on December 1st, has been put on hold due to the preliminary injunction issued by a Federal court in Texas on November 22, 2016.
As we reported previously, the federal overtime rule would have had significant impact on exempt status employees because it more than doubled the federal salary level that must be met for an employee to be classified as exempt from overtime under one of the so-called “white-collar” exemptions (the executive, administrative and professional exemptions).
The new rule would have required a minimum salary of $913 per week to meet the white-collar exemptions compared to the current level of $455 per week. This increase would have amounted to an annual salary of $47,476 for a full-time employee which is significantly higher than California’s minimum salary threshold for these exemptions.
Because the court’s order is a temporary injunction, there is no final determination as to whether the Rule will be reinstated. The U.S. Dept of Labor filed a notice of appeal and eventually the court will have to decide whether the Dept. of Labor can or cannot proceed with implementing the increase to the salary threshold.
What Do I Do Now?
California employers should continue to use the California salary test to determine whether an employee can be classified as exempt under the executive, administrative and professional exemptions.
The minimum monthly salary test for most exempt executive, administrative and professional employees which is the monthly/annual salary must be no less than two times the state minimum wage for full-time employment:
The minimum salary threshold will be:
- 2016: $3,466.67 per month ($41,600 per year)
- 2017: As of January 1:
- Employers with 26 or more employees: $3,640 per month ($43,680 per year) based on a minimum wage of $10.50
- For employers with less than 25 employees: No minimum wage increase so the minimum monthly salary test remains at $3,466.67 per month ($41,600 per year)