Employers across the country were preparing for a big change to Fair Labor Standards Act (“FLSA”) regulations regarding employee exemption in December 2016. The new rule would have increased the minimum salary employers must pay to exempt employees—those who perform primary duties that classify them as “executive,” “administrative,” “professional,” “outside sales,” or “computer”—from $455 per week ($23,660 per year for full-time employees) to $913 per week ($47,476 per year for full-time employees).
Just before the new regulations were to take effect, a federal district court issued a preliminary injunction preventing the rule from being implemented. In 2017, the Department of Labor decided to stop pursuing an appeal of the decision, and the new overtime rule was dead.
Over two years later, on March 7, 2019, the Department of Labor issued a proposed new regulation that increases the minimum salary for overtime exemptions under the FLSA from $455 per week to $679 per week ($35,308 annually for full-time employees). If implemented, the new minimum salary level will take effect in January 2020.
Few employees in California would be affected by the new FLSA rules because state law already requires that exempt employees receive a monthly salary that is greater than, or equal to, twice the state’s minimum wage for a full-time employee working 40 hours per week. Thus, in 2019, exempt employees of a California employer with 25 or fewer employees must receive an annual salary $45,760, and exempt employees of an employer with more than 25 employees must receive an annual salary of at least $49,920.
The minimum salary for exempt employees in California increases with the state’s minimum wage, which will reach $15 per hour by 2023. The proposes FLSA regulations will apply to California employers that are not covered by the California Labor Code and the applicable wage orders, including most public employers.
The Department of Labor is currently seeking public comment for its proposed update of the salary threshold. Additional information is at https://www.dol.gov/whd/overtime2019/index.htm.