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New Overtime Rules from the Feds: Little Impact for San Diego Employers

The federal Department of Labor (“DOL”) recently proposed new regulations with respect to overtime payment obligations under the Fair Labor Standards Act (“FLSA”). If ultimately adopted, the proposed standards would make over a million workers eligible for overtime. However, here San Diego, the impact will be minimal since all the affected workers are already eligible for overtime under California labor laws.

Under current federal law, in general, employers must pay overtime to employees if they work more than 40 hours per week. However, not all employees are eligible for overtime under the FLSA. In general, the law phrases this in terms of exemptions. Broadly speaking, employees are exempt from overtime if they are:

  • Salaried (not paid by the hour) and
  • Earn more than a certain minimum annual salary (currently $23,660 a year) and
  • Provide what are managerial or executive or professional duties

Broadly speaking, the duties element involves workers whose work involves the exercise of discretion, independent decision-making, or use of professional skills. See DOL fact sheet here. If the income threshold is raised, then fewer employees will exempt. Put another way, a higher income threshold means more employees will be eligible for overtime pay.

As noted, the current income threshold is $23,660 per year. Based on a 52-week work year and based on 40 hours a week, that calculates to about $11.40 an hour (or $455 a week). The new DOL proposed regulation will increase the minimum to $35,308 per year which calculates to about $679 per week or about $17 per hour. Estimates indicate that, if adopted, more than 1.1 million workers will become eligible for overtime.

However, there will be almost no impact here in California if the proposed regulation is adopted. With respect to overtime, California already has a much higher exemption standard than set by the federal government. Under the California rule, the exemption income threshold is set at twice the state minimum wage annualized. At the current $12 an hour, that calculates to $49,920 a year, far more than the new $35,308 threshold being proposed by the DOL. The exemption threshold will continue to increase over the next few years. The California minimum wage is now at $11 for employers with 25 or fewer employees and $12 an hour for employer with 25+ employees. See here. The state minimum wage will increase to $15 per hour by 2023. See new report here. By 2023, the income threshold will be $62,400.

Note that the FLSA has certain industry-specific exemption. See here. A couple of examples include these:

  • Certain commissioned employees of retail or service establishments
  • Salespeople and clerks in the auto, truck, trailer, farm implement, boat, or aircraft industries
  • Transportation workers like railroad and air carrier employees and taxi drivers
  • Some broadcasting employees like announcers, news editors, and chief engineers
  • Employees of motion picture theaters
  • Farmworkers

Contact San Diego Corporate Law Today

If you would like more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard can be reached at (858) 483-9200 or via email. Mr. Leonard can help with employee-related matters such as employment contracts, drafting and/or reviewing company policies and procedures, creating and/or updating employee handbooks, and more. Like us on Facebook.

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