Are you a California employer who has managers or other employees on a salary? Are you aware that the minimum wage increase to $9.00 per hour as of July 1, 2014 may affect their rates of pay as well? If your salaried workers are classified as exempt from overtime, you may need to increase their pay in July. First, let’s review what qualifies a worker as exempt from overtime rules in California.
These guidelines are taken from Wage order 4 which covers professional, clerical, technical, mechanical and similar occupations, however, your specific situation may be covered by a different wage order. There are 3 main exemption categories:
- Executive: Customarily and regularly directs the work of two or more other employees, who has the authority to hire or fire other employees or whose recommendations as to the hiring/firing and advancement will be given particular weight, who regularly exercises discretion, and who is primarily engaged in duties that meet the test of the exemption
- Administrative: the performance of office/non-manual work is directly related to management policies or general business operations, who exercises discretion and independent judgement, and is employed in a bona fide executive or administrative capacity, and whose work meets the test of the exemption
- Professional: Licensed or certified by the State of California and is primarily engaged in the practice of one of the following professions: law, dentistry, optometry, architecture, engineering, teaching, or accounting, or whose occupation is recognized as a learned or artistic profession
If your employees fall into these categories, they may be salaried workers who are exempt from overtime. However, there are some specific regulations that apply in order to not have overtime laws apply to their employment. They must perform their exempt duties at least 51% of the time and they must be paid no less than twice the minimum wage for full time employment (40 hours).
With the increase in the minimum wage in July, you’ll need to review the pay of your salaried workers to make sure your exempt employees are making at least double the minimum wage (this is an increase of $2.00 per hour) when calculating their earnings. If your employee is paid weekly, they must be paid at least $720.00. If calculated on an annual basis, the wage must be at least $37,440.00 or $3120.00 per month.
Those whose pay do not meet these requirements but are paid salary are considered non-exempt and are subject to overtime rules as well as other regulations not discussed in this post. If you’d like to read about the overtime rules in CA, see https://affordablebookkeepingandpayroll.com/2013/02/overtime-rules-ca/.
If you’d like to read more on the specifics of exempt employees (there is way too much info to include here!), see http://www.dir.ca.gov/Iwc/IWCArticle4.pdf.
I hope you’ve found this post helpful. We’d love to hear your feedback, so please leave a comment. We appreciate it a lot!
