Posted on: June 28th, 2016
Much has been written in the last few months about California’s new $15 minimum wage law but that’s just the beginning of the story. What hasn’t received much press is the impact it will have on exempt employees (those employees exempt from overtime requirements). Nearly all the Wage Orders in California exempt executive, administrative, and professional employees from overtime so long as they meet the following regulatory requirements:
Salary
An employee must earn a monthly salary equivalent to at least twice the state minimum wage for full-time employment, which is defined as 40 hours per week.
Duties
While each Wage Order has a specific duties test, they all require that more than half of the employee’s work time must be spent performing exempt duties exercising discretion and independent judgment.
Accordingly, when the state minimum wage reaches $15.00 per hour, the minimum monthly salary requirement for exempt employees will be $5,200, or $62,400 per year(2x minimum wage). With the minimum salary for a front line exempt employee reaching $62,400, small business owners will have to consider whether it makes sense financially to classify employees as exempt.