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Higher Required Salaries for Managers Nationwide?

In 2016, the U.S. Department of Labor (DOL) issued a Final Rule raising the minimum salary amounts to qualify for executives, administrative, professional, outside sales and computer employees overtime exemption under the Fair Labor Standards Act (FLSA). It would have more than doubled the amount that employers had to pay their managers in order for them to be exempt from overtime. See Employers Must Comply No Later Than December 1, 2016 (May 26, 2016).

The Final Rule was to take effect on December 1, 2016. However, a federal judge blocked its implementation on November 22, 2016. See Judge Stops Overtime Rules Days Before December 1, 2016 Implementation. A pending appeal has been dormant while the DOL engaged in further rule-making for an alternate proposal.

The DOL has recently announced a Notice of Proposed Rule-making (NPRM) for its new proposed exempt employee pay rule. If approved, required pay amounts will increase from $455/week, $1,972/month, or $23,660/year to $679/week, $2,692/month, or $35,308/year, a roughly 49 percent increase. Employers would be permitted to fulfill 10 percent of the requirement through non-discretionary bonuses and other incentive payments, such as commissions.

The proposal seeks to include periodic review for upward increases of the exempt pay threshold, but not automatic increases.

The federal job duties tests will not change for executives and administrators to qualify for overtime exemption.

As proposed, this federal NPRM should have little, if any impact on California’s standards for executive and administrative exemptions from overtime.  In this state, the minimum salary to qualify for such exemption already exceed the above increased levels. In California, the qualifying salary minimums for a company employing 26 or more employees are currently $960/week; $4,160/month; and $49,920/year; for a business employing 25 or fewer employees, the qualifying minimums are currently $880/week; $3,813.33/month; and $45,760/year.

The public is requested to provide any comments, which will lead to amendments in the final version of the rule. The deadline for comments will be 60 days from when the Notice of Rule-making is published in the Federal Register.

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For further information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin

March 21, 2019