What OT hike could mean in California

By Jonathan Horn, U-T San Diego

President Obama is expected to issue an executive order on Thursday that could increase overtime eligibility for millions of salaried workers across the country.

While the details haven’t been released yet, the president is expected to raise a weekly wage threshold that determines whether an employee who is on salary can get overtime.  The move would affect workers such as fast-food or convenience store managers, who aren’t highly compensated but are treated as exempt from overtime.

Currently, the Department of Labor says salaried workers are exempt from overtime if they earn more than $455 per week, which equates to a little more than 1.5 times the federal minimum wage of $7.25 per hour.  It’s an annual salary of $23,660.  Obama is expected to increase that threshold, opening the door for more managerial-type workers to get overtime.

It’s unclear whether the measure will have a large impact in California, where a salaried worker is exempt from overtime if they earn more than $640 per week, or twice the state minimum wage of $8 per hour.  Many fast-food managers in San Diego already don’t make enough to be exempt from overtime, earning a median $13.87 per hour, or $584 per week, the state Employment Development Department reports.

Also, in California, the qualifying threshold to be exempt from overtime will increase twice in the next two years.

On July 1, when the minimum wage increases to $9 per hour, salaried employees will be exempt from overtime if they earn more than $720 per week.  And on Jan. 1, 2016, when the minimum wage increases to $10 per hour, the threshold rises to $800 per week.

“It’s a very common misunderstanding.  A salary does not keep you from overtime,” said Dan Eaton, employment attorney at San Diego’s Seltzer Caplan McMahon Vitek.  “A secretary is paid a salary for sure but is entitled to overtime.  The way you do it is to back it into their hourly wage.”

Some have lobbied Obama to raise the threshold to $1,000 per week, which would equate to a salaried employee earning up to $12.50 per hour and still be eligible for overtime.  Should that happen, and the federal law is higher than California’s, Eaton said the Fair Labor Standards Act dictates that the more employee friendly law applies, meaning the federal threshold takes precedence.

Eaton said if Obama’s order changes exemption requirements, he expects a wave of lawsuits in what is already one of the most litigated areas of California employment law: Who is exempt and who isn’t?

“On this very issue are employees who are nominally called things like assistant manager.  Are they properly classified as exempt or not? The liability for the employer is really considerable,” Eaton said.



March 12th, 2014  |  Categories: News
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