California Minimum Wage and Overtime Exemptions

In order to meet the requirements for California's major overtime exemptions, you must be paid a monthly salary equivalent of no less than 2 times the state minimum wage for full-time employment. This is the "state" minimum wage. If you work in a jurisdiction that has a higher minimum wage, such as Los Angeles or San Francisco, the exemption requirement is computed based on California's state minimum wage. Of course, if you are an hourly employee, or otherwise not exempt from overtime, typically you are required to be paid the higher minimum wage of the jurisdiction that you are working in.

California has 2 different minimum wages: one for employers with 25 or fewer employees and one for employers with 26 or more employees. The following is the minimum wage for non-exempt employees:

Effective Date	Small Employer (25 or less)	Large Employer (26 or more)
January 1, 2017	$10/hr	$10.50/hr
January 1, 2018	$10.50/hr	$11/hr
January 1, 2019	$11/hr	$12/hr

 

The following is the table for the minimum salary required by California's executive, administrative, and professional exemptions as well as the federal requirements (Fair Labor Standards Act or FLSA). You must be paid the higher of the two in order to be exempt. As a note, the federal salary requirement is set to adjust to inflation once every three years.

Effective Date	Small Employer (25 or less)	Large Employer (26 or more)	FLSA Requirement
January 1, 2017	$800/week	$840/week	$913/week
January 1, 2018	$840/week	$880/week	$913/week
January 1, 2019	$880/week	$960/week	$913/week

 

From the above, you can see that the federal minimum will be higher until 2019. You should read this article on issues with the Fair Labor Standards Act's minimum salary requirement. It is also important to note that FLSA overtime is only overtime for work after 40 hours in a week, while California is overtime past 8 hours in a day as well as doubletime for work past 12 hours in a day. For most misclassification cases, this is not a significant issue. However, if you do not work in excess of 40 hours in a week, but your employer is using the exemption to not pay California overtime, then this will be legal as long as you meet the requirement for the exemption. For instance, if you are a professional engineer, are paid $900/week, and your employer wants you to work 3 days of 12 hours each for a total of 36 hours each week without paying overtime. This is legal because, although you are nonexempt under the FLSA, you are not working in excess of 40 hours in the week and you are exempt under California law, at least for 2017 and 2018. On the other hand, if you are required to work in excess of 40 hours for any reason, then you must be paid the federal overtime because your salary is less than $913/week.

Another point of confusion regarding overtime exemptions for executives, administrators, and professionals is that they are also exemptions from minimum wage. That is, if you are a legitimate executive employee and you spend the majority of your time supervising employees and directing your department, you will be exempt from overtime if you make a salary of $913/week during 2017. The issue is that many employers work exempt employees well in excess of 40 hours a week. Let us say the employer pays you a weekly salary of $950 per week. You have a busy week and you work 100 hours. This comes out to only $9.50/hr, which is less than California's minimum wage. However, as long as you meet the requirements for the exemption, you are not only exempt from overtime, but also from minimum wage. In that case, it is legal, even though you are making less than minimum wage.

Some exemptions, such as the outside sales exemption, do not have a minimum salary requirement. Other exemptions, such as inside sales, do require that you make in excess of the minimum wage for each hour that you work.

If you have questions about your particular situation, please email questions@michaeltracylaw.com or fill out an overtime evaluation form.