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California Raises Minimum Pay Requirements for Certain Exemptions for 2019

12/01/18

Author: ADP Admin/Monday, December 3, 2018/Categories: California

Overview: The California Department of Industrial Relations has announced an increase to the pay rates computer software employees and physicians must receive in order to be exempt from overtime. Additionally, the minimum salary required for the administrative, professional, and executive exemptions will increase at the start of the year. These new rates take effect on January 1, 2019.

Effective Date: January 1, 2019

Details:

Background:
Under California Labor Code Sections 515.5 and 515.6, computer software employees and physicians are exempt from the state's overtime requirements if they meet specific duties requirements and earn at least a certain rate of pay. These pay thresholds are adjusted annually for inflation.

California also has exemptions for bona fide administrative, professional, and executive employees. To be exempt from overtime, these employees must meet certain state salary and duties tests. They must be paid a salary of at least twice the state minimum hourly wage based on full-time employment of 40 hours per week. Since the state's minimum hourly wage will increase on January 1, 2019, the minimum salary thresholds for these exemptions will also increase.

Computer Software Employees:

Computer software employees may be paid on an hourly or a salary basis in order to qualify for exemption from California's overtime requirements. Beginning January 1, 2019, these employees must earn at least:
  • $45.41 per hour (for all hours worked);
  • A monthly salary of $7,883.62; or
  • An annual salary of $94,603.25.
Physicians:

To qualify for exemption from the state's overtime requirements in 2019, licensed physicians and surgeons are required to earn an hourly wage of at least $82.72.

Administrative, Professional, and Executive Employees:
For the administrative, professional, and executive exemptions, employers with 26 or more employees must pay a salary of at least $960 per week beginning January 1, 2019. Employers with fewer than 26 employees must pay a minimum salary of at least $880 for these exemptions.

Action Required: California employers with exempt employees should ensure that they meet the applicable salary and duties tests. Otherwise, these employees must be classified as non-exempt and are entitled to overtime.

As always, please be sure to contact your HR Business Partner for guidance and if you have any questions.

*Produced in partnership with Littler Mendelson P.C. 

This content provides practical information concerning the subject matter covered and is provided with the understanding that ADP is not rendering legal advice.

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Tags: Compliance CornerState Update12/01/18

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