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Some Parts of New Federal Overtime Rule Don’t Apply in California - CalChamber Alert

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Can California employers count bonuses and commissions toward the new federal salary requirement? Can employees in California be classified as exempt under the “highly compensated employee” exemption?

No, and no. Neither of these two provisions of the new federal overtime rule—which raises the federal salary test for the executive, administrative and professional exemptions to $913 per week ($47,476 annually) effective December 1, 2016—apply to California employees.

Bonuses and Commissions
 
In addition to increasing the salary test, the new federal rule revises the salary test to allow employers to use nondiscretionary bonuses and incentive payments, such as commissions, to meet a portion of the test.

Subject to certain requirements, employers will now be able to rely on bonuses and commissions to satisfy up to 10% of the new federal salary test for workers outside California.

This provision does not apply to California employees, however. California law does not allow such payments to be used to meet the exempt salary test.

In California, only an employee’s actual salary is considered in determining whether the employee meets the applicable salary test. Although exempt employees in California can receive bonuses and commissions, they still must be paid a salary that meets the applicable salary test.

‘Highly Compensated Employees’

Under federal law, certain “highly compensated employees” can be exempt by meeting only a minimal duties test if their compensation exceeds a certain amount. The new federal rule changes the annual compensation requirement for this exemption from $100,000 to $134,004.

This provision also does not apply to California employees. California law does not have a “highly compensated employee” exemption. For an employee to be exempt in California, the employee still must meet the applicable duties and salary tests for one of the exemptions.

Preparing for December 1

As a reminder, for executive, administrative and professional employees to remain exempt after December 1, 2016, those employees must be paid at least $913 per week ($47,476 annually for a full-time employee). The employees still must meet the applicable California duties test.

If any of your executive, administrative or professional employees are currently paid less than $913 per week, you must either increase their salaries up to the new federal salary test or reclassify them as nonexempt employees.

If you increase salaries, you must do so for the entire workweek that includes December 1, 2016. For example, if you have designated your workweek as Monday through Sunday, you need to increase salaries on Monday, 1/2 November 28, 2016.

For help preparing for the change to the federal salary test, see the California Chamber of Commerce Checklist for Complying with the Federal Overtime Rule, and What California Employers Need to Know About the New Federal Overtime Rule.

More Information

For additional information about exempt employees and the new federal overtime rules, visit HRCalifornia.com.

The Labor Law Helpline is a service to California Chamber of Commerce preferred and executive members. For expert explanations of labor laws and Cal/OSHA regulations, not legal counsel for specific situations, call (800) 348- 2262 or submit your question at www.hrcalifornia.com.

Staff Contact: Erika Pickles © 2016 California Chamber of Commerce. Privacy Policy

http://calchamberalert.com/2016/11/11/some-parts-of-new-federal-overtime-rule-dont-apply-in-california/

 


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