Beginning January 2016, employers who want to claim the salaried executive, administrative, or professional exemption under California law, must begin paying a guaranteed salary of at least
$3,467 per month (or $41,600 per year). The guaranteed salary for a claimed exemption must be equal to at least twice the applicable minimum wage, and because the California minimum wage
rises to $10 per hour in January, the guaranteed salary must equal at least $20 per hour, or $3,467 per month. Our review of local Minimum Wage Ordinances (established by Cities) does not show any of them attempt to impact the definition of an executive, administrative, or professional worker for whom a business may claim an overtime exemption.
To claim the overtime exemption starting in January 2016, employers will still have to ensure such workers
(a) spend a majority of their time in high-level exempt functions and
(b) receive a guaranteed (not subject to reduction) salary equal to at least $3,467 per month.
California businesses should check their payroll information for managers, supervisors, and other high level personnel, to ensure that where an overtime exemption is being claimed, the minimum
salary equals at least $3,467 per month or $41,600 per year.
Overtime wages are a topic of conversation in our law office every week. Overtime wage violations appear constant, and many businesses do not understand even the simplest rules about paying overtime wages. Here are some of the simplest rules.
The employer bears the complete burden of proving any claim for overtime exemption. Just as proving a tax exemption is the burden of the taxpayer, so is proving an overtime exemption the burden of the employer. If you are claiming any type of overtime exemption, talk to an expert to confirm that claim.
Paying salaries does not eliminate the need to pay overtime wages. Thousands of employees working over 8 hours in a day, or 40 hours in a week, are due overtime wages in addition to the salary already being paid.
Overtime is payable (a) daily (for hours over 8), and (b) weekly (for hours over 40), and (c) on the 7th consecutive day during the same workweek (even when no daily or weekly overtime work occurred before this 7th day). Overtime at twice the regular rate is also due for certain hours.
Salaries paid to employees for whom the employer is claiming an executive, administrative, or professional overtime exemption must be guaranteed salaries. “Guaranteed” means the salaries are not subject to reduction for any reason, except for the few reductions allowed by law.
Using a bi-monthly payroll requires the employer to determine whether daily or weekly overtime occurred during the “split” week, i.e., the week that has hours inserted into two different pay periods.
Paying undocumented cash for the overtime hours is one of the worst ideas for handling overtime obligations. So many legal problems are born from this practice, the problems are almost too numerous to list.
Allowing workers to work daily overtime early in the work period, then allowing them to take off the same number of hours later in that same work period (e.g., “comp time”), still leaves an overtime obligation that must be paid.