On December 1, 2016 the United States Department of Labor’s new regulations determining which salaried employees are exempt from overtime pay requirement go into effect. Currently, any salaried employee who is paid more than $455.00 per week (the equivalent of $23,660.00 per year) and who works as an executive, administrator, professional, information technology specialist, or outside salesperson is exempt from federal overtime pay requires. Thus employers need not pay these employees time-an-a-half for hours worked in excess of 40 per workweek. Under the Department of Labor’s new regulations, an employee will only be exempt if he or she makes $913.00 per week, or $47,476.00 per year.
To be exempt under California’s overtime laws, executives, administrators, and professionals must make twice the minimum wage (currently $10.00 per hour, or $800.00 per 40-hour work week). Information technology specialists must make at least $41.00 per hour, or $1640.00 a week, to qualify. Outside salespersons are exempt from overtime requirements regardless of salary. Now that the federal standard is higher than the state standard, California employers must comply with the new, more stringent federal law.
By more than doubling the threshold for the exemption, the Department estimates that an additional 4.3 million workers will qualify for overtime pay. If an employee’s salary is only slightly below the threshold, it may be cheaper to simply increase his or her salary, rather than paying overtime. There is good news for employers, however. Under the new federal rule, commissions and bonuses are included in calculating an employee’s salary.