The U.S. Department of Labor (DOL) has adopted a final rule which changes the salary requirement for exempt employees. Previously under federal law an employee who otherwise meets the duties requirements for exempt status had to be paid an annual salary of at least $23,660. The new rule requires an annual salary of at least $47,892. Based on this new rule employers will need to ensure that all exempt employees meet this minimum salary requirement.
Under the federal requirement employers can add nondiscretionary bonuses to meet the required salary level but only up to 10% of the salary. This rule was expected to go into effect on December 1, 2016.
On November 22, 2016, a Texas district court issued a preliminary (temporary) injunction which enjoins DOL from implementing or enforcing this rule on a nationwide basis pending a further decision by the court. Thus, the new salary requirement cannot currently be enforced by the DOL.
What this means for you:
1) While the change in the federal salary requirement will not go into effect immediately, this could change if the further order of the court upholds the DOL final rule. While it is unlikely that this ruling is imminent, it is possible that the court could uphold the final rule and make it retroactively effective as of December 1, 2016. Alternatively, if the court does not uphold the final rule employers will not need to make any changes in salary based on a new federal requirement. Given the court’s language in the current decision it appears that the court may find that the DOL exceeded its statutory authority in setting the salary requirement and subjecting it to automatic updates.
2) Contrarily, California employers presently must meet the salary requirement under state law which is twice the state minimum wage. Thus, the current California annual salary requirement is $41,600 but this will increase to $43,680 when the new statewide minimum wage ($10.50 per hour for employers with more than 25 employees) goes into effect on January 1, 2017. Furthermore, under California law bonuses may not be included in determining the salary for the exempt employee.
If you have any questions or require additional assistance please contact GMK employment law attorney Jeanne Flaherty at 818-755-0444 or firstname.lastname@example.org.