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Exempt Employees Must Get Paid More!

Thomas M. Lee

Employers need to remember that California’s new minimum wage law will affect how they must pay their exempt employees, such as managers and admininstrators.

In July 2014, the California minimum wage will increase to $9 per hour, and then to $10 per hour in January 2016. This law does not only affect how employers pay their minimum wage workers but more importantly how much they must pay their overtime exempt employees.

For example, managerial employees who spend more than half their time supervising other employees and performing managerial duties that require their independent judgment discretion, and who have the authority to hire or fire other employees, are exempt from the laws requiring payment of overtime wages and provision of uninterrupted meal or rest breaks, if they are paid at least two times the California minimum wage for full time employment. Based on a 40 hour work week and the current $8 per hour minimum wage, exempt employees must be paid at least $16 per hour if they are paid hourly. If they are paid by a fixed salary, their salary must be at least $640.00 per week ($8 x 2 x 40 hours), $2,560.00 per month ($8 x 2 x 40 hours x 4 weeks), or $33,280 per year ($8 x 2 x 40 hours x 52 weeks).

Starting in July 2014, managerial/exempt employees must be paid at least $18.00 per hour. If paid by salary, the amounts increase as follows: $720.00 per week ($9 x 2 x 40 hours), $2,880.00 per month ($9 x 2 x 40 hours x 4 weeks), or $37,440 per year ($9 x 2 x 40 hours x 52 weeks)

Finally, starting in January 2016, managerial/exempt employees must be paid at least $20.00 per hour. If paid by salary, the amounts increase as follows: $800.00 per week ($10 x 2 x 40 hours), $3,200.00 per month ($10 x 2 x 40 hours x 4 weeks), or $41,600 per year ($10 x 2 x 40 hours x 52 weeks).

Remember, if an exempt employee is paid less than the above, it does not matter how many employees they supervise, hire, or fire, or how much time they spend performing managerial or administrative duties, they will be entitled to overtime wages, meal and rest periods, and if not provided, they will most likely sue or file a Labor Department complaint. Every employer knows that fighting an unpaid overtime wage case is always expensive and risky because every lawsuit and complaint will attract other employees to do the same. Thus, it is important for employers to follow the labor laws carefully or they can suffer disastrous financial consequences.

Please note that the information I am providing here in this entry, or in my website is NOT to be construed as legal advice nor is it meant to form an attorney-client relationship. For a free legal consultation by phone, please call or email me anytime.

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