What's New for Employers
During 2016, and heading into 2017, California employers have had to figure out to handle changes in the law such as the increase in minimum wage, the federal changes to the rules regarding exempt employees, and the Fair Pay Act, which requires equity in pay between employees of different genders who are in similar positions. As is often the case, there's more to each of these than meets the eye.
For instance, the recent amendment to the Fair Pay Act (Labor Code Section 1197.5) provides that an employee's prior salary cannot, by itself, justify any disparity in compensation, and expands the requirements of the Act to include employees' race or ethnicity, and not just gender.
As it relates to the new federal minimum for an exempt employee's salary, a California employer must consider both federal and state law to determine if they are in compliance. The Final Rule published by the U.S. Dept. of Labor, took effect December 1, 2016, requiring that to be exempt from overtime pay, the employee must be paid at least $913/week ($47,476 per year). Nondiscretionary bonus pay may be included in the calculation, up to 10% of the total compensation, and paid at least quarterly. Note that the employee's job must still meet the applicable 'duties test.'
California has wage orders for various occupations that vary; however, most require that exempt employees be paid at least twice the minimum wage. Currently that's no problem, because the federal minimum of $47,476 annually is greater than two times the minimum wage at 40 hours per week of $43,680 ($10.50 as of 1/1/17 x 2,080 hours/year). However, California's minimum wage is scheduled to increase periodically, and while the federal minimum is also set to adjust every three years based on a wage index, that index is a national measure, and it is very possible that the federal minimum will be overtaken by California minimums at some point.
The takeaway for each of these is that a employer may want to schedule periodic reviews of their compensation programs, which will not only help with compliance with laws, it will provide an opportunity to develop overall retention plans for key employees.
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