The minimum wage has been in the news recently, with new developments at both the state and federal levels.
On the federal side, President Obama signed an executive order in February 2014 raising the minimum wage for federal contractors to $10.10 per hour effective January 1, 2015. President Obama has also called for passage of the Harkin-Miller bill, which would raise the federal minimum wage from $7.25 to $10.10 per hour over three years in 95-cent increments and then tie the rate to inflation. And in March 2014, President Obama directed the Department of Labor to revise the federal regulations governing overtime pay for hours worked in excess of 40 per week. It is not yet clear what the specific changes to the overtime regulations will be, but likely areas of focus are: (1) raising the minimum salary an employee must earn in order to be classified as exempt from overtime pay requirements; (2) incorporating a quantitative component that would require a manager to spend a specified percentage of time performing “executive” level work in order to qualify for an exemption; and (3) clarifying who qualifies for the “computer professional” exemption.
On the state side, California has already enacted an increase in the state-wide minimum wage. Effective July 1, 2014, California’s minimum wage will increase to $9.00 per hour. On January 1, 2016, California’s minimum wage will rise again, to $10.00 per hour. Employers should keep in mind that these increases in the minimum wage affect exempt employees, as well: under California’s Labor Code, exempt employees must receive at least two times the minimum wage. This means that as the minimum wage goes up, so too does the minimum salary that must be paid to all exempt employees. Currently, that annual minimum salary is $33,280, but with the increase in the minimum wage, the annual minimum salary for an exempt employee will rise to $37,440. Of course, the so-called “salary test” is only one component of determining whether a given employee is exempt from overtime requirements; the job description must also satisfy the “duties” test that speaks to the employee’s responsibilities.
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Additional Source: President Takes Action Meant to Increase Pay Equity for Employees of Federal Contractors; New York Employers Face Far-Reaching Employment Law Changes; 2013 State Legislation on Minimum Wage; Sacramento Business Journal, Seattle outstrips California with a $15 minimum wage proposal (May 1, 2014)