California’s minimum wage will go up to $10.00 per hour on January 1, 2016, which in turn will raise the California white collar exemption rate.
Below is a checklist of items for employers to keep in mind, as the change will have an impact on a wide range of pay practices:
- Exempt Status: Effective January 1, 2016, the minimum salary requirements for white collar exemptions will increase to $800 per week—$3,466.67 per month or $41,600 annually (the current rate is $3,120 per month or $37,440 annually).
- Inside Sales: Regarding Wage Orders 4 and 7, employees must earn more than 1.5 times the new minimum wage each workweek, and more than half of the employee’s compensation must derive from commission earnings. Employers should pay special attention to draws against commission.
Note: Outside salespeople do not need to meet the minimum salary requirements.
- Local Ordinances: Some local ordinances require an even higher rate of pay, e.g., San Francisco currently requires a minimum wage of $12.25 per hour, and San Jose’s rate is $10.30 per hour.
Note: Exempt classification is based on the state minimum wage, not local ordinances.
- Computer-Related Professionals: The hourly rate for computer-related professionals will increase from $41.27 to $41.85, the monthly rate will increase from $7,165.12 to $7,265.43, and the annual rate will increase from $85,981.40 to $87,185.14.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
John S. Battenfeld
Barbara J. Miller
Christopher J. Banks
Carol R. Freeman