The year is coming to an end and with that, new overtime and labor laws will be in effect. Changes in labor requirements can often cause more stress to employers. This is true especially when there are correlations between federal and state requirements. In such cases, the law that offers the most protection to the employee applies. Typically, California is not affected by federal overtime rules; however, conflicting changes in minimum wage requirements call for increased attention to the salary test and federal updates.
Federal Overtime
As of December 1, 2016, the federal standard for salaried employees increases to $47,476 per year and the compensation requirement for highly-compensated employees increases to $134,004. Currently, California’s minimum salary threshold is 40 hours x twice the minimum wage of $10 per hour — about $6,000 below the new federal salary threshold. However, as the minimum wage incrementally increases to $15 per hour by 2022, many employees will be well above today’s federal threshold. As a result, the federal overtime salary threshold will be updated every three years beginning January 1, 2020.
CA Minimum Wage Conflict
The first complication comes about when minimum wage reaches $12 per hour. At this rate, California’s threshold will be $49,920 — $2,444 above the federal overtime threshold. This will call for a classification change or salary increase in order to comply with the overtime classification rules.
No Changes to Duties Test
Contrary to what many expected, the Department of Labor did not revise its duties test. However, because California has a more stringent test, employers must make sure to meet both federal and state requirements.
Federal vs. California Overtime
As California salaries near the federal threshold, it is important to be familiar with the difference between the two when calculating and tracking overtime. Federal law requires time-and-a-half overtime pay when an employee works more than 40 hours in a workweek. On the other hand, California requires overtime pay at a time-and-a-half if an employee works more than eight hours in a day or on seven consecutive days in a workweek. If an employee works more than 12 hours in a day or more than eight hours on the seventh consecutive day in a workweek, the employer is required to pay double time. Taking this into consideration, it may be costly for employers to convert employees to non-exempt.
In order to determine what the best course of action for your business and to learn more about how this is going to affect California employer, visit calchamber.com.
Image courtesy of freedigitalphotos.net/winnond
