AB 1565 WOULD RAISE THE MINIMUM SALARY FOR EXEMPT EMPLOYEES
During the Obama Administration, the United States Department of Labor (DOL) began a rule making process to update and increase the minimum salary needed for a person to qualify for an overtime exemption under the federal Fair Labor Standards Act. The DOL sought to more than double the minimum salary from $23,660 per year to $47,476 per year. However, these proposed regulations never went into effect because a federal court issued an injunction late last year halting the implementation of the new rules. The Obama Administration appealed that ruling, but it is widely expected that President Trump will abandon that appeal so that the existing standards never go into effect.
The California minimum salary is a moving target of sorts. Rather than set the minimum salary at a specific dollar amount, the California rule sets the minimum at twice the current minimum wage. In 2017, the minimum salary threshold for an overtime exemption is $41,600 for employers with 25 or fewer workers and $43,680 for those with 26 or more. As California's minimum wage rises, so too will this amount. By 2020, California's salary threshold for the overtime exemption will exceed what was to be the new federal rule.
Assembly Bill 1565 proposes to raise the minimum salary in California to the higher of the proposed federal standard of $47,472 ($3,956 monthly) or twice the state's minimum wage rate. Notably, AB 1565 does not distinguish between large and small employers. That means that if the legislation passes, all California employers would be immediately subject to the $47,472 threshold.
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Richard S. Rosenberg Janet S. Soultanian Ballard Rosenberg Golper & Savitt, LLP