Fair Labor Standards Act (FLSA) Changes For Minimum Salary Requirements

This is a brief overview of some legislation that passed recently regarding the minimum wage for salaried employees.  In the past, Fair Labor Standards Act (FLSA) hasn’t affected California employers much because the state regulations tends to be more stringent then the Federal. This latest federal change for minimum salary is more stringent than CA’s current requirements.   Here is a top level overview of what you need to know:

1. Effective date is December 1, 2016

2. FLSA Exempt Salary Level – $47,476 annually ($913 per week) for a full-year worker.  This is higher than California’s current base salary for exempt workers, which is $41,600. Will require monitoring as CA minimum wage increasing yearly through 2022 (at $15 per hour)

3. The new FLSA rule established a mechanism for automatically updating the FLSA salary and compensation levels every three years to maintain the levels above federal thresholds.

4. If an employee needs to be moved from exempt to non-exempt due to this, the CA rules for overtime will still apply as they are more stringent that the federal.

5. FLSA salary basis test to allow employers to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level. However, the final rule imposes some limitations on this credit, and employers who wish to credit non-discretionary bonuses and incentive payments are cautioned to read the rule carefully and consult with employment counsel if warranted.

6. No change to the FLSA duties tests.

7. Sets the total annual compensation requirement for highly compensated employees (HCE) to a minimal duties test for full-time salaried workers nationally to $134,004 (no duties test requirements) (note: this category of exemption is not allowed in California

For more information visit the Department of Labor:
2016 Overtime Rules Fact Sheet Overview DOL Announces Salary Threshold