Exempt Employees Must Be Paid $50,000 Annually By 2016 Under New Regulations From The U.S. Department of Labor

More than a year ago, President Barack Obama directed the Secretary of Labor to “modernize and streamline” the agency’s white collar exemption regulations under the federal Fair Labor Standard Act.  Today, the Department of Labor (DOL) announced it was proposing a new rule raising the minimum salary level to qualify for an exemption to the 40th percentile of weekly average earnings of full time salaried employees nationwide.  For 2013, this equates to $921 per week, or $47,892 per year.  For 2016, when the rule will likely go into effect, this will likely equate to $970 per week or $50,440 per year.

Expressing the minimum salary as being at the 40th percentile – the level at which 40% of salaried workers earn less than the amount and 60% earn more – means that the minimum salary level will change each year.  And suprisingly, the DOL’s proposed rule will have an impact in California, for it significantly exceeds California’s minimum salary level for exempt status:  currently $720 per week, $37,440 annually, increasing on January 1, 2016 to $800 per week, $41,600 annually.

What is also surprising is that the DOL did not propose a change to the duties test.  Many anticipated it would propose the more stringent standard requiring that more than half the employee’s time be spent performing exempt functions.  That change may still be in the offing.  Unlike the proposed change to the minimum salary level, however, if adopted it would have little impact in California, where this standard is already the rule under the duties tests for the state exemptions.

- Feicia Reid

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