Orange County Branch Newsletter

November 2016

Law and CE News

Breaking : Stay of New Federal Wage Exemption Limits

Breaking: Stay of New Federal Wage Exemption Limits
On November 22, 2016, a federal judge in Texas stayed the impending United States Department of Labor standards for wage exemption requirements. Until this stay is lifted, employers may continue to follow the current overtime and exemption rules.

“Exempt” employees are professional, administrative, or managerial employees who are exempt from overtime rules, provided they meet certain job duty qualifications and receive a salary above a threshold limit. The federal exemption rule scheduled to take effect on December 1, 2016, would have raised the
threshold from $23,660 to $47,476. This stay prevents the new exemption limit from going into effect while the court further studies the authority of the Department of Labor and validity of the new rule.

Despite this delay in implementing the new federal rule, there is still a thicket of laws relating to exemptions under California law—most notably that to be exempt, an employee’s salary must be twice the minimum wage, which is currently $10 an hour in California. This makes the effective exemption threshold $41,600 ($800 a week). On January 1, 2017, the minimum wage in California increases to $10.50 an hour (for employers with 26 or more employees), which has an exemption limit of $43,680. The minimum wage will increase to $11 an hour in 2018, and then increase by one dollar each year until 2022, when it hits $15 an hour (an exemption limit of $62,400 a year). So, no matter what happens to the federal rule, the reprieve on the increase of the exemption limits is only temporary in California.

In addition to state law, many local jurisdictions in California have higher minimum wage requirements, which mean higher exemption limits. The City of Los Angeles, for example, has a two‐tiered system for minimum wage, with employers with 26 or more on their payroll required to pay $10.50 an hour (which
will rise eventually to $15 an hour by mid‐2020), and employers with 25 or less on payroll following these increases by one year (so will rise to $15 an hour by mid‐2021). Therefore, employers with 26 or more employees on payroll have a current exemption limit of $43,680 in Los Angles, and on July 1, 2017, the wage jumps to $12 an hour and the exemption limit to $49,920.

This federal stay poses a conundrum for employers who have already provided salary increases to employees to maintain their exemption status. Employers should keep in mind the approaching California exemption limit increases, as well as the likely appeal of the stay by the Department of Labor.

Please contact us if you would like to discuss this or other employment matters further:
Robert Stellwagen, Esq.  | [email protected] 
Ryan Kohler, Esq. |[email protected]
Nothing contained in this article should be considered legal advice. Anyone who reads this article should consult with an attorney before acting on anything contained in this or any other article on legal matters, as facts and circumstances will vary from case to case.