Federal Salary Minimum Threshold Placed on Hold.
On November 22nd, a federal judge for the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction on the Department of Labor’s new overtime rules, which were scheduled to take effect December 1, 2016. The judge ruled that the Department of Labor (DOL) likely overstepped its rule-making authority by raising the salary threshold as high as it did and by implementing the automatic increase every three years.
What this means now:
- The effective date of the federal rules has been delayed indefinitely.
- Employers may choose not to implement the changes they had planned for Dec. 1 compliance.
- The new rules have not been thrown out or invalidated – at least not yet.
At this point, we do not know how long the injunction will be in place or if the rules will be dismissed entirely. It is also possible the final decision will allow some parts of the rule to stand but not others. We will keep you updated as more information is announced on the topic.
California Minimum Salary Threshold – Overtime Exemption
Effective January 1st, 2017 the minimum wage in the state of California will increase from $10.00 to $10.50 an hour for employers with 26 or more employees.The minimum wage for employers with 25 or less employees will remain the same until 2018.
California employers must also be mindful of how the state’s scheduled minimum wage increases will affect the salary threshold for overtime exemption.
Although the recently-proposed federal minimum salary threshold of $47,476 has been placed on hold (as of November 2016), California’s minimum salary threshold (overtime exemption threshold) remains in effect, and will change for certain employers in 2017.
California’s Minimum Salary
The “white collar” exemption is based on a minimum monthly salary of no less than two times the state minimum wage for full-time employment. In 2016, this rate is $3,466.67 per month or $41,600 per year based on the $10.00 per-hour minimum state wage.
- For employers with 26 or more employees, the state minimum wage will increase to $10.50 beginning in January 2017, resulting in a new minimum salary threshold of $43,680.
- In 2017, for employers with 25 employees or less, this rate of $41,600 based on the $10.00 per-hour minimum state wage will remain the same.
- Note: It is also possible that a proposed federal salary threshold will resume in 2017. Please watch for updates on this topic in the future.
For more information please visit the Department of Industrial Relations website,
(Note: This information is provided as a service and may be subject to change. Please visit the
Please review your employee pay rates, overtime rates, salary amounts and other pay rates to ensure you are meeting the new requirements. Changes to your employee’s pay rates are only made by authorized persons within your organization. Any changes or revisions to rates of pay should be adjusted using your normal payroll input method (PayEntry, M3Online, phone, email). California Payroll will process the information provided by employers. California Payroll does not determine or audit rates of pay for processing. Remember to review your Register Prior to Processing or your Input Worksheet for pay rate information. M3Online and PayEntry users can view employee’s information directly in the system and there are a number of reports available to view your employees’ information.
State enforcement agencies have made it a top priority to stop employers from engaging in “wage theft,” which includes not paying the minimum wage for all hours worked. Employers should examine all pay practices that may need review; this includes overtime rates of pay, base salaries, piece rates, non-productive time, commission and more.
Please contact you Client Manager with any questions, (925) 240-2400.
To avoid penalties, make sure you display the most current rates on your required labor notices. Let us handle your posting compliance with our Labor Law Poster Replacement Solution; to learn more contact your Client Manager (925) 240-2400.