California Bill Would Raise Overtime Threshold Statewide

California Bill Would Raise Overtime Threshold Statewide

The controversial new overtime eligibility rule the US Department of Labor put in place last year remains tied up in litigation and seems unlikely to survive in its original form, but several states are pushing ahead with their own new rules. The stalled federal regulation would have raised the salary threshold at which employees are exempt from overtime pay from $23,660 to $47,476, and these states are using it as a model. The New York State Labor Department raised the threshold there at the beginning of this year, and Democratic state lawmakers in Connecticut, Maryland, Michigan, Rhode Island, and Wisconsin are looking at legislation that would do the same.

Now we can add California to that list. Assembly bill 1565, introduced recently by Assemblyman Tony Thurmond (D-Richmond), would amend California’s labor code to “exempt from overtime compensation an executive, administrative, or professional employee, as defined, if the employee earns a monthly salary equivalent to either $3,956 or an amount no less than twice the state minimum wage for full-time employment, as defined, whichever amount is higher.” SHRM’s Lisa Nagele-Piazza has the details on how the bill would affect employers if passed:

Employers may be wondering what the reasoning is behind the proposed legislation, especially since the state’s exempt salary threshold is already scheduled to exceed $47,476 for all employers by 2020. “It is more symbolic than anything,” said James McDonald Jr., an attorney with Fisher Phillips in Irvine, Calif. “California’s Legislature is so opposed to the current administration in Washington that it will likely try to put back for employees whatever the federal government takes away.” …

In its current form, A.B. 1565 doesn’t distinguish between large and small employers. If enacted, it would raise the exempt salary threshold to meet the now-blocked federal overtime rule one year before it was set to go beyond it for larger employers and two years early for smaller employers in California, [Michael Kalt, an attorney with Wilson Turner Kosmo in San Diego,] explained.

The symbolism of the bill may turn out to be more significant than its impact, but changes to employment law in California, the largest state in the US, are closely watched around the country and often exert influence beyond the state’s borders. Additionally, even if these state-level efforts to raise the overtime threshold come to nothing, some organizations, include large employers like Walmart, are opting to keep in place the changes they made to employee compensation in anticipation of the new overtime rule, preferring to eat higher wage costs rather than renege on promised raises.