New Overtime Rule Change Extends Overtime Benefits

As discussed on this blog before, Los Angeles employers must adhere to two standards of labor laws: the Fair Labor Standards Act (federal law), and the California labor code (state law). Thankfully for Los Angeles employees, California standards are more stringent than federal standards, allowing workers more benefits in this state than many others.

In California, employees are not considered exempt from overtime unless they meet 3 conditions:

  • They spend 50% of their time on exempt duties (hiring and firing, management of other employees and the business as a whole)
  • They utilize independent business discretion and knowledge in executing their duties, or some type of specialized professional skill (i.e. lawyers, doctors, computer programmers)
  • Their salary amounts to at least double the California minimum wage on a weekly basis

However, as of May 18th, 2016, President Obama has approved a Department of Labor-proposed change to the Fair Labor Standards Act that alters overtime standards. In 2015, the DOL proposed raising the standard for overtime exemption. As it was written, the FLSA exempts certain employees from overtime who make as little as $23,000 a year—below the poverty line for most families.

This nonsensical loophole was a result of the administrative duties test for exemption, which was intended for positions with high compensation—upper-level management, administrative roles, professional occupations, C-level executives, and others. However, as written, the exemptions also apply to convenience store managers and lower-level office workers.

The DOL’s change raises the exemption limit from a salary of $455 a week ($23,660 a year) to more than twice that amount, at $913 a week ($47,476 a year). That means any employees making less than $47,476 annually would be eligible for overtime wages. Experts estimate that this would extend overtime benefits tomore than 4 million workers nationwide.

In addition, it would set the compensation requirement for “highly compensated employees” subject to a minimal duties test at $134,004—the 90th percentile for full-time salaried workers nationwide. This would require any high-level employees paid below this ceiling to undergo a minimal duties test in order for an employer to consider them exempt from overtime.

Not only that, but the law would raise the annual salary ceiling every 3 years. The rule is set to become effective on December 1st, 2016. The first update to the salary and compensation threshold will take place on January 1st, 2020, continuing every three years until the law is changed or updated.

Now, most federal changes do not affect California workplaces because employers must always obey the more stringent of the state and federal standards—and state standards are almost always more stringent. However, California’s current salary-test for exemption is $800 a week, or $41,600. The newly proposed rule would raise that ceiling for employers by nearly $6,000 a year—allowing thousands of Los Angeles employees to seek overtime wages that were denied them before.

If you are classified as exempt from overtime, but you do not meet the three standards outlined above, then you need to call the office of Alan Burton Newman, PLC immediately. As a Harvard-educated wage & hour lawyer, I have the experience and insight to make sure you get the wages you deserve. Thanks to my work, my clients often receive their money within 90 days or less. Call (310) 986-2792 today.

My office offers free consultations if you believe that you are being robbed of overtime pay. Call to discuss your case, or contact my firm using our short online form.