The above increases to the hourly minimum wage will also impact the salary level needed for exempt employee purposes. (a), emphasis added.) Federal law provides that deductions from pay for full days of sickness or disability will not affect the exemption if the employer has a plan in place that compensates the employee “for loss of salary occasioned by such sickness or disability,” or if the employee has not yet qualified for the plan or has exhausted its benefits. However, the exempt salary minimum alone does not classify an employee as exempt. To do so, however, several requirements must first be met. 6. If you any attorneys or law firms mentioned on this website, you are initiating a professional relationship with us within the meaning of rule 7.3, subdivision (a)(2), of the California Rules of Professional Conduct. The minimum salary, among other requirements, may differ from the general exemption test above. § 541.600(a) [“To qualify as an exempt executive, administrative or professional employee under section 13(a)(1) of the Act, an employee must be compensated on a salary basis at a rate of not less than $455 per week (or $380 per week, if employed in American Samoa by employers other than the Federal Government), exclusive of board, lodging or other facilities.”]; see also Cal. )↥, Conley v. Pacific Gas & Electric Co. (2005) 131 Cal.App.4th 260, 267 [“It is undisputed that the combined effect of these provisions of federal law is to preclude employers from docking the pay of an employee for an absence of less than a day (a partial-day absence ). The base salary must be fixed and … (a); Cal. In a commission-based arrangement, the size of the employee’s compensation depends on the amount or value of the thing that was sold.⁠25, A discretionary payment that an employer can choose to pay or withhold, such as a performance bonus, is not a commission even if it is computed as a percentage of sales or profits.⁠26. Exempt employees in California generally must earn a minimum monthly salary of no less than two times the state minimum wage for full time employment. Requiring exempt employees to use annual vacation or leave time when they miss work, even if they are absent for only part of a day, will not usually affect an employee’s exempt status.⁠23 When leave or vacation time has been exhausted, however, deducting pay for missing a partial day of work would require the employer to treat the employee as nonexempt. Effective July 1, ... 2019. 8, § 11040 [providing that, for each exempted category, the employee must earn “a monthly salary equivalent to no less than two (2) times the state minimum wage for full-time employment”].↥, See Negri v. Koning & Associates (2013) 216 Cal.App.4th 392, 397 [“A salary is generally understood to be a fixed rate of pay as distinguished from an hourly wage.”]; 29 C.F.R. The minimum salary for exempt employees in California is not arbitrary. For calendar year 2017, the exempt minimum salary for these smaller employers remains $800/week or $41,600 per year. Code Regs., tit. on January 2022. The distinction can be important because nonexempt employees have more rights in the workplace than exempt employees. 8, §§ 11010⁠–⁠11170, subds. Code of Regs., tit. Thus, the salary level for exemption purposes for larger employers increased from the most recent $41,600 to $43,680 on January 1, 2017, and will increase with each subsequent increase, ultimately reaching $62,400. Employees who are paid on a commission basis are sometimes exempt from California’s overtime pay laws. The rules that apply to California’s minimum salary are explained in more detail below. (a) [“The Industrial Welfare Commission may establish exemptions from the requirement that an overtime rate of compensation be paid pursuant to Sections 510 and 511 for executive, administrative, and professional employees, if the employee is primarily engaged in the duties that meet the test of the exemption, customarily and regularly exercises discretion and independent judgment in performing those duties, and earns a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.”].↥, Labor Code, § 515, subd. The employee’s earnings are more than one-and-a-half times the minimum wage. is an associate of Melmed Law Group P.C. (a) [requiring employees to “customarily and regularly exercises discretion and independent judgment in performing” the duties of their job].↥, 29 C.F.R. For 2021, this means exempt employees must receive a minimum annual salary of $58,240 for employers with more than 26 employees, and $54,080 for employers with 25 employees or less. Because most exempt employees in California must make at least twice the minimum wage on an annual basis, the current minimum salary for exempt employees who work for employers having more than 25 employees will increase from $41,600 to $43,680 effective January 1, 2017. Federal law also recognizes a separate highly compensated employee exemption, which involves a simpler test for determining whether an employee is exempt from overtime. Those include: Some employees, however, are exempt from some or all of these legal protections, as well as related laws.⁠5 In most cases, there are three simple requirements to determine whether a worker is an exempt employee under state law: If all three requirements are met, the employee will usually be classified as “exempt” from overtime, minimum wage, and rest break requirements (but not meal break requirements). Code of Regs., tit. Code of Regs., tit. Subdivison 1(A) of that wage order provides that subdivisions 3 to 12 “shall not apply to persons employed in administrative, executive, or professional capacities.” California wage orders for most occupations contain similar exemptions.↥, Labor Code, § 515, subd. This means that the minimum salary for exempt employees in California will also be increasing annually. Salary level is one of three tests used to determine employee exempt status. The minimum salary requirement for exempt employees according to the Fair Labor Standards Act is $23,600 per year or $455 per week. Posted onFebruary 19, 2017Authorsacemploymentlawyer. Code Regs., tit. Medical interns and residents do not qualify. the difference between exempt and non-exempt employees in California, Guide to California’s Minimum Wage Laws in 2020 and Beyond. 8, § 11010, subds. California employers with 25 or fewer employees will lag behind the above chart by one year, therefore, increases for these smaller employers will take effect on January 1, 2018, and continue through January 1, 2023. This website and its content are not intended to be relied on as legal advice, and should not be relied on as such. This is really important to keep in mind, because the change from year-to-year … However, for several industries and types of employees, they do not receive the benefit of these protections. Instead, it is tied to the minimum wage laws in the state, which recently increased again. 8, § 11040.↥, Labor Code, § 512, subd. If they do, then the involved employees do not meet the salary basis test, and are nonexempt for purposes of overtime pay.”].↥, Rhea v. General Atomics (2014) 227 Cal.App.4th 1560, 1569.↥, Cal. Now the state is leading the way for exempt salary levels. §§ 395.1⁠–⁠395.13; Cal. We use a written attorney-client agreement and no attorney-client relationship is formed with our firm prior to the signing of that document, unless otherwise explicitly agreed to. They teach students who are in kindergarten or any of grades 1 through 12, They earn at least twice the state’s minimum wage, and, They hold a baccalaureate degree (or higher) from an accredited institution of higher learning, or they meet the requirements for a teaching credential from California or any other state.⁠, Who spends more than half of their working time away from their employer’s place of business, and, Who sells items, services, contracts, or the use of facilities.⁠, Certain providers of 24-hour residential childcare;⁠, The employer’s spouse, children, and parents.⁠, Your regular paychecks should be at least. A salary, for these purposes, is a fixed minimum payment of wages that is paid regardless of hours worked or the amount or quality of work performed.⁠10 Employees who are paid an hourly wage cannot be classified as exempt employees⁠—⁠even if their work consists primarily of job duties that would otherwise be considered exempt. Effective January 1, 2018, the minimum wage for all industries was $11 per hour for employers with 26 or more employees and $10.50 per hour for employers with 25 or fewer employees. Code Regs., tit. For immediate access, join online or by phone at (800) 649-4921. 8, §§ 11010⁠–⁠11170, subds. Minimum Salary for Exempt White-Collar Workers at Employers with 26 or more employees: Minimum Salary for Exempt White-Collar Workers at Employers with 25 or fewer employees: 2017: $43,680: $41,600: 2018: $45,760: $43,680: 2019: $49,920: $45,760: 2020: $54,080: $49,920: 2021: $58,240: $54,080: 2022: $62,400: $58,240: 2023: $66,560: $62,400 The above increases to the hourly minimum wage will also impact the salary level needed for exempt employee purposes. This will increase on July 1, 2014 to a minimum exempt salary of $37,440 per year. Usually, employers prefer to classify employees as exempt. The current salary threshold is $3,466.67 a … They work in either: the retail industry, or a professional, technical, or clerical occupation.⁠, Be paid at an hourly rate of at least $84.79 per hour.⁠, Perform, as their primary duties, tasks that require them to be licensed.⁠, The employee must be primarily engaged in work that is intellectual or creative.⁠, The employee’s primary duties must require the exercise of discretion and independent judgment.⁠, The employee must be highly skilled in a field of computer systems analysis, programming, or software engineering.⁠, The employee’s primary duties must involve designing or developing computer hardware or software.⁠, If the employee is hourly, they must be paid at least $46.55 per hour.⁠, If the employee is salaried, they must earn at least $96,968.33 per year.⁠. 905, 909] [adopting Labor Secretary’s view that “employees whose pay is adjusted for disciplinary reasons do not deserve exempt status because as a general matter true ‘executive, administrative, or professional’ employees are not ‘disciplined’ by piecemeal deductions from their pay, but are terminated, demoted, or given restricted assignments”].↥, See, e.g., Prachasaisoradej v. Ralphs Grocery Co., Inc. (2007) 42 Cal.4th 217, 231 [“the public policy of special protection for wages generally had been expressed in numerous statutes and decisions that required the prompt and full payment of wages due, as the employee’s exclusive property”].↥, See Dept. Code of Regs., tit. Meanwhile, the minimum salary threshold for exempt employees under federal law has been increased to … Because you are a non-exempt employee, your minimum salary depends on the number of hours you work during each pay period. 1(D).↥. Under SB3, the minimum exempt salary will increase incrementally, first to $43,680 and eventually to $62,400, once the minimum wage reaches $15 per hour in 2022. Industrial Relations, DLSE Opn. Code of Regs., tit. (a) [“All wages, other than those mentioned in Section 201, 201.3, 202, 204.1, or 204.2, earned by any person in any employment are due and payable twice during each calendar month, on days designated in advance by the employer as the regular paydays.”].↥, Labor Code § 1182.12, subd. (b). To qualify for this exemption, the following requirements must be met: Commissions are wage payments that an employee is entitled to as a result of sales they make. 13, § 1200, et seq.↥, See Cal. Preview This premium content is for our members. (3)(D).↥, Labor Code § 204.1 defines commissions as “compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount or value thereof.” (See also Areso v. CarMax, Inc. (2011) 195 Cal.App.4th 996, 1003.↥, See Labor Code, § 2751, subd. Our consultations are free and confidential. California law is governed, in part, by a series of regulations called wage orders, which have been issued California’s Industrial Welfare Commission.⁠47 The wage orders have adopted several exceptions to California’s overtime laws, in addition to those listed above, that apply to workers in specific industries or jobs. Contacting any attorneys or law firm mentioned on this website, without more, does not create an attorney-client relationship. § 541.602(a)(5).↥, Conley v. Pacific Gas & Elec. California law requires that in order to be classified as exempt, an employee must earn a monthly salary which is twice the state minimum for a full time employee (40 hours per week). This is important because as the state minimum wage rises, so too will the exemption compensation amount! Under federal law, docking an employee’s salary as a disciplinary action may nullify an employer’s classification of the employee as exempt.⁠18, In California, however, “docking” a salary as a disciplinary action should never happen. (a)(2)(A)⁠–⁠(C).↥, Labor Code, § 515.5, subd. Sign In Below. Code Regs., tit. Or Start a Free Trial Now for 15 days. The discussion above has focused on the three most commonly-exempt employees (professionals, executives, and administrators). If this article was helpful, you already know you can trust us. But some teachers at private schools are exempt even if they don’t meet those requirements. ; see also Collins v. Overnite Transp. In 2020, an employee in your position is usually entitled to an annual salary of at least $. For employers with 25 or fewer employees, the minimum wage increases will begin on January 1, 2018, and will continue at the same pace ultimately reaching $15.00 on January 1, 2023. Exempt v. Excluded Employees The term “exempt” is often confused with “excluded”, however they are different. 8, § 11140, subd. 8, § 11040, subd. As at the time of writing, the minimum salary requirement for exempt salaried workers, according to the Fair Labor Standards Act is $684 per week or $35,568 per annum – an increment from the $455 per week or $23,660 per year. Importantly, California’s minimum wage is set to increase every year on January 1st until 2023. Instead, they will be considered exempt if: Employees who are considered “outside salespersons” are generally considered exempt employees.⁠38 An outside salesperson is defined as someone: Some truck drivers are exempt from California’s overtime laws (but not other employment rights, like meals breaks or the minimum wage).⁠40 This exemption applies to interstate truck drivers and drivers who transport hazardous materials.⁠41, In those situations, the drivers’ hours are controlled by either: federal regulations,⁠42 or California’s motor vehicle regulations.⁠43, Union employees are sometimes exempt from California’s overtime laws.⁠44 To qualify as exempt, the employees must be employed under a collective bargaining agreement that expressly provides for the wages, hours of work, and working conditions of the employees.⁠45, The collective bargaining agreement must also provide premium wage rates for all overtime hours worked and a regular hourly rate of pay of at least 30 percent more than the state minimum wage.⁠46. In general, this website is an advertisement for attorney . The Labor Code states that the minimum salary for exempt employees in California is: [A] monthly salary equivalent to no less than two times the state minimum wage for full-time employment. Under California law, employers must pay exempt employees a salary that is double the annual income for full-time work at the minimum wage. An excluded employee is excluded from collective bargaining under the collective bargaining statutes (the Dills Act). For employers with more than 25 employees, the hourly minimum wage will increase according to the following schedule: to $10.50 on January 1, 2017; to $11.00 on January, 2018; to $12.00 on January 1, 2019; to $13.00 on January 1, 2020; to $14.00 on January 1, 2011; and to $15.00 on January 1, 2022. (c) [excluding short-term productivity bonuses, bonus and profit-sharing plans that are not based on a fixed percentage of sales or profits, and “[t]emporary, variable incentive payments that increase, but do not decrease, payment under the written contract” from the statutory definition of a commission].↥, Memorandum re Overtime Exemption for Licensed Physicians and Surgeons (Oct. 22, 2019), available here (Opens in new window)↥, Labor Code, § 515.6 [“Section 510 shall not apply to any employee who is a licensed physician or surgeon, who is primarily engaged in duties that require licensure pursuant to Chapter 5 (commencing with Section 2000) of Division 2 of the Business and Professions Code, and whose hourly rate of pay is equal to or greater than fifty-five dollars ($55.00). The right to be paid at least the minimum wage;⁠, The right to overtime wages when they work more than eight hours in a workday, more than 40 hours in a workweek, or seven consecutive days;⁠, The right to meal and rest breaks when their shifts exceed a certain duration.⁠. 8, §§ 11010⁠–⁠11170 [wage orders of the California Industrial Welfare Commission].↥, See, e.g., Cal. Are You Entitled To Reimbursement for Using Your Own Tools at Work? Co. (2003) 105 Cal.App.4th 171, 175.↥, Cal. This means that the minimum salary for exempt employees in 2020 is either: These numbers are calculated by doubling the applicable minimum wage, multiplying that amount by 40 hours per week, the result of which is then multiplied by 52 weeks and divided by 12 months. Return to: Table of Contents . 3 [overtime], 4 [minimum wage], 5 [reporting time pay], & 12 [rest periods]. Employees who are paid an hourly wage are usually considered non-exempt.⁠9 (Although there are a number of job-specific exemptions that apply to certain types of hourly employees, like commissioned employees, outside salespersons, and computer professionals.) 8, § 11090 (3)(L).↥, Cal. A salary, for these purposes, is a fixed minimum … Under California’s salary basis test, exempt employees must (among other requirements) earn at least twice the state’s minimum wage, meaning that under the current $10 per hour minimum wage, exempt employees must earn an annual salary of $41,600 ($10 per hour x 2 x 40 hours per week x 52 weeks per year). (Labor Code, §§ 1171, 1182.12. 8, § 11090 (3)(L); 49 C.F.R. Posted in *New Exemption Rules. Code Regs., tit. So, when the minimum wage goes up statewide, so does the exempt salary threshold. Notably, California’s salary basis test for exempt employees is directly tied to the state’s minimum wage. 8, § 11050, subd. In most cases, employees must be paid a salary to qualify as an exempt employee. There are, however, a handful of other occupations that are exempt from some or all of California’s labor laws. Currently the minimum salary for a full time, exempt employee is $33,280 per year. (a); Cal. Code of Regs., tit. This calculation gives us a monthly salary that is equal to twice the state minimum wage for full-time employment.⁠17. Your salary must be at least equal to California's minimum wage. What is the minimum salary for an exempt employee? Increase In Minimum Salary for Exempt Status. The department shall adjust this threshold rate of pay each October 1, to be effective the following January 1, by an amount equal to the percentage increase in the California Consumer Price Index for Urban Wage Earners and Clerical Workers.”].↥, Labor Code, § 515.5, subds. California Minimum Wage To Increase to $15 / hour by Year 2022, How To Ask Your Manager or HR For Anything The Right Way, Three Tips For Enhancing Your Case When Fired While On Medical Leave, Skelly Hearing And Your Wrongful Termination Case In Court, My Top Three Deposition Tips for Your Employment Case. 3.↥, Cal. If you require legal advice, you should contact a lawyer to advise you personally about your situation. The other two are the salary basis test and job duties test. This means that the minimum salary for exempt employees also increased as of January 1, 2019. )↥, Auer v. Robbins (Opens in new window) (1997) 519 U.S. 452, 456 [117 S.Ct. A salary that is tied to the number of hours worked, with no minimum guarantee, is treated as the payment of hourly wages and will not satisfy the exemption’s salary requirement.⁠11, To meet the salary test, an employee must be paid a monthly salary that is at least twice the state minimum wage for full-time employment.⁠12, “Full-time employment,” for these purposes, is defined as 40 hours per week.⁠13 And the phrase “monthly salary” refers to the amount of wages paid in a month, not to the frequency of payment⁠—⁠most employees are entitled to be paid twice a month.⁠14, In 2020, people that work for an employer with 25 or fewer employees are entitled to be paid a minimum wage of at least $12.00 per hour. 3.↥, Cal. Discretion and Independent Judgment . If you are not sure whether you are an exempt employee, please review our article explaining the difference between exempt and non-exempt employees in California. Because most exempt employees in California must make at least twice the minimum wage on an annual basis, the current minimum salary for exempt employees who work for … In California, many workers are entitled to receiving overtime and minimum wage protections. Letter No. To make things a bit easier, we’ve built the calculator below for employees to check the minimum salary an employee in their situation is normally entitled to receive under California law. There are many exceptions and caveats to the minimum salary requirement. In calculating an employee’s salary for the purposes of the salary test for exempt employees, employers are permitted to deduct any unpaid vacation days or personal days that are taken by the employee.⁠21 Importantly, however, the deductions must reflect a full day of pay due to absence from work. On Tuesday, the U.S. Department of Labor issued its final rule concerning overtime exemptions. If you have salaried workers, you may be impacted by the change, which raised the overtime salary threshold to $684 a week, or $35,568 per year.. Here’s an in-depth look at the new overtime rule for 2020, and a few steps on how to adapt. How many employees does your employer have? Code of Regs., tit. Notice: This domain, its subdomains, and its pages (collectively, this "website"), are the property and creation of , who does business as Work Lawyers. Employees who are paid an hourly wage are usually considered non-exempt.⁠9 (Although there are a number of job-specific exemptions that apply to certain types of hourly employees, like commissioned employees, outside salespersons, and computer professionals.). Washington state has taken dramatic steps to increase the minimum salary for overtime-exempt employees. Commission payments constitute more than half of the employee’s total compensation. Employees are usually only exempt if they are paid a salary that equals at least twice the applicable state minimum wage for full-time employees. People that work for an employer with more than 25 employees are entitled to be paid a minimum wage of at least $13.00 per hour.⁠15. The law contemplates annual subsequent increases after the final scheduled increase, generally tied to consumer inflation, which the Director of Finance will determine by August 1st of each year, with the increase rounded to the nearest 10 cents, to become effective the following January 1. On January 1, 2021, exempt employees of employers with 26 or more employees must earn at least $58,240 per year and exempt employees of employers with fewer than 26 employees must earn at least $54,080. is responsible for all communications made on this website. (c) [“For the purposes of subdivision (a), ‘full-time employment’ means employment in which an employee is employed for 40 hours per week”].↥, Labor Code, § 204, subd. This increase also affects the minimum salary for exempt employees, who must earn at least two times the state minimum wage in order to meet the salary test for the white-collar exemption. 3.↥, See, e.g., Cal. (3)(D), 11070, subds. Your regular paychecks should be at least $ (before taxes and deductions). Most California employees are entitled to certain important rights. The minimum wage applies to “all industries” and to “any occupation” except outside salespersons and individuals participating in certain national service programs. Occupations to which special overtimes rules apply include: Labor Code, § 515, subd. As some of you may be aware, the California state minimum wage will increase annually until January 1, 2023. on January 2022. and takes his cases through Melmed Law Group P.C. Most importantly for this article, the employee must usually be paid a salary that is at least twice the state minimum wage for full-time employment.⁠1. For more information about California’s minimum wage, please read our article: Guide to California’s Minimum Wage Laws in 2020 and Beyond. New Minimum Salary For Exempt Employees Takes Effect January 1, 2020. Earlier this year, California Governor Jerry Brown signed a bill into law which will increase California’s minimum wage to $15.00 per hour by 2022. Salary Requirements for Exempt Employees in California. Code of Regs., tit. In California, exempt employees must receive a salary of at least twice the state minimum wage for a 40-hour workweek, in addition to meeting the general duties and other requirements. 2002.05.06 (May 6, 2002), available here (Opens in new window).