Brace Yourself – Changes from the Wage & Hour Division/Department of Labor – How much am I paid?

The US Department of Labor, Wage & Hour Division is proposing a federal minimum annual salary increase for Exempt Employees to at least $50,440 for 2016. This proposed federal minimum salary threshold is higher than the current salary threshold in California. Under this proposed federal rule, more California employees would potentially need to be classified as non-exempt employees under this FLSA guideline and therefore entitled to overtime; simply because they don’t meet the federal minimum salary threshold.

Currently, to be exempt in California, an employee must earn at least double the minimum wage, which currently amounts to an annual salary of $41,600 (State minimum wage of $10.00 per hour x 2080 hours x 2).

For example, if the proposed rules go into effect in 2016:

• Employees making less than $50,440 would be non-exempt under federal law and entitled to overtime under the FLSA rules.
• Employees making more than $41,600 but less than $50,400 could be exempt under California law but non-exempt under federal law and entitled to weekly overtime under the FLSA.

As usual, employers must comply with the law that gives the most protection to the employee. Here is a link to the proposed regulation: https://www.dol.gov/whd/overtime/nprm2015/factsheet.htm.

So far, the final ruling is scheduled to be announced by June 2016.

Here are some suggestions on what you can do now to prepare: Conduct an analysis of your exempt employees’ average hours worked per week. This will allow you to determine whether or not it would be more advantageous for you to compensate these employees by the hour, plus providing overtime hours, rather than increasing their base salary to $50,440. However, other factors to take into account are employee morale, and employee retention. If this new regulation goes into effect, and your exempt employees are re-classified to hourly employees and earning less than the mandated federal wage for exempt, these employees may opt to seek other opportunities where they would be offered a higher annual salary. Think about it! What is best for your company?