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November 17, 2016

Changes to FLSA White Collar Exemptions Take Effect December 1

The deadline for employers to implement changes to the federal “white collar” overtime compensation requirement is just two weeks away.

As previously reported in Spotlight, the U.S. Department of Labor issued revised regulations covering the “white collar” exemptions under the Fair Labor Standards Act (“FLSA”) last May. Those employees who meet the regulatory requirements are not entitled to overtime pay for hours worked over 40 in a work week. Pursuant to DOL regulations, in order to be exempt from the overtime pay requirements, an employee must perform certain management duties and be paid a specified salary.

The salary requirement was fixed at $455 per week; however, the revised regulations increase the salary requirement to $913 per week or $47,476 annually. Up to 10 percent of the gross wages can be comprised of sales commissions or nondiscretionary bonus under federal law.

However, it should be noted that under California law, an employee is generally exempt from overtime if s/he earns at least twice the state minimum wage for full-time employment. The minimum salary amount under state law will increases to $880 per week ($45,760 annually) on January 1, 2017, when the minimum wage increases. Going forward, California employers and all employers across the country will have to pay anyone who earns less than $913 per week ($47,476 annually) overtime pay, unless they work in “agriculture” or are otherwise exempt from the rule. Moreover, the “ten percent rule” codified in the federal law does not apply in California, so California employers will have to satisfy at least  $880 per week or $45,760 per year of the exempt employee’s salary with straight base pay.

“Agricultural” employees, unless covered by very limited exemptions, are subject to the minimum wage portion of the FLSA, but are exempt from the overtime provisions of the FLSA. Thus, the new rule won’t have an effect on “agricultural” employees. However, if an employee performs non-agricultural work at any time during the week, the exemption from overtime is void and the employee must be paid overtime for any hours over forty.

In addition, the revised regulations will have no impact upon some other employees treated as exempt from the FLSA’s minimum-wage and/or overtime provisions, including:

  • Salespeople falling within the “outside salesman” exemption;
  • Employees authorized to practice, and who are actually practicing, law; and
  • Employees whose work meets the computer-employee exemption requirements who are paid on an hourly basis at a rate of at least $27.63, among others.

The increased salary threshold will also not affect the “motor carrier” overtime-only exemption applying to drivers, drivers’ helpers, loaders, and mechanics in qualifying circumstances, since such employees are exempt under a different section of the FLSA not covered by the revised regulation.

For questions, contact Jason Resnick at (949) 885-2253.