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On June 30, 2015 the United States Department of Labor (DOL) announced proposed regulations that raised the minimum salary necessary to be considered exempt from the Fair Labor Standards Act of 1938 (FLSA) minimum wage and overtime requirements. The new regulations would raise the current salary basis from $455 per week ($23,660 per year) to $970 per week ($50,440 per year). In addition, the DOL proposes to raise the salary basis for Highly Compensated Employees from $100,000 to $122,148 annually. The DOL further is considering updating the minimum salary level automatically to keep it from becoming outdated, as well as revising the test for duties that meet the exemption for white collar professions. As this article went to print the DOL was seeking comments on its proposals, although the comment period ended August 29, 2015.

The objective behind the proposed increase (the first since 2004) is twofold: (1) to ensure that FLSA overtime protections are fully implemented, and (2) to simplify the identification of nonexempt employees.

The proposed increase to the federal minimum salary basis, which acts as a floor to state minimum wage requirements, will now eclipse the California minimum salary basis. In California, the current annual salary minimum is twice minimum wage ($9.00 per hour), or $37,440. Minimum wage in California will increase from to $10.00 per hour effective January 1, 2016, which will raise the salary basis to $41,600. State legislators have passed a bill proposing to raise the minimum wage to $11.00 per hour on January 1, 2016 and again to $13.00 per hour on January 1, 2017,[i] but it is unclear whether the Governor will sign the bill.[ii] If that proposed bill goes into effect, it would raise the salary minimum to $45,760 in 2016 and $54,080 in 2017.

It is estimated that approximately 420,000 workers (and their corresponding employers) in California will be affected by the proposed increase.[iii]

[i] Patrick McGreevy, California Senate Passes Bill Raising Minimum Wage to $13 From $9, L.A. Times, June 1, 2015.
[ii] Patrick McGreevy, Governor’s Finance Office Opposes Bill Raising Minimum Wage in California, L.A. Times, July 10, 2015.
[iii] Christine Mai-Duc, Obama’s New Overtime Rules: How They’d Work and Who They’d Affect, L.A. Times, June 30, 2015.