Accuchex Blog

California Labor Laws: Overtime and Minimum Wage

Posted by Tristan Ruhland on Nov 19, 2015 12:26:25 PM

california-labor-laws-overtime-and-minimum-wageRunning and growing a business in California can be both rewarding and especially challenging. It is no secret that the state is well-known for being a regulatory behemoth and staying abreast of the continual flow of rules and new legislation can be a full time job.

For example, California labor laws are changed, revised and added to every year and 2015 was no exception. When federal labor laws are added to the equation, compliance for HR professionals can become challenging. 

Tracking California Labor Laws - Overtime, Minimum Wage, and You

There are two topics of particular concern this year in regards to California labor laws - overtime and minimum wage. Both of these are regulated and mandated at the state and federal levels. As noted in previous posts, the federal rules regarding overtime pay are in the process being changed by the U.S. Department of Labor (DOL)

These proposed changes would more than double the salary threshold for overtime eligibility to $970 a week in 2016. That means employees earning a yearly salary of $50,440 or less automatically would be eligible for overtime pay.

For right now, the threshold is still $455 a week, meaning that a salaried worker making more than $23,660 annually does not automatically qualify for overtime pay under federal standards.

The threshold rules were updated in 2004. According to the Obama administration, that threshold been eroded by inflation. President Obama also is proposing to adjust the salary threshold automatically in the years to come, either by tying it to inflation indexes or by basing it on median wage levels.

What effect would this have in California?

The proposed rules won't be felt as strongly in California. This is because California has already has strict overtime laws, which include a salary threshold that is twice the current minimum wage of $9 an hour.

This means that workers with annual salaries of $37,440 or lower qualify for overtime pay. That threshold will rise to $41,600 in January, when the state’s minimum wage is raised to $10 an hour.

In addition, California requires that employers pay time-and-a-half overtime when eligible workers reach more than eight hours in a day, even if they don't surpass 40 hours in a week.

According to figures released by the Obama administration, 420,000 workers in California would benefit from the changes, but it’s unclear whether this calculation takes into account the state’s existing overtime laws.

Changes in the California Minimum Wage

With a few exceptions, most all employees in California have to be paid the current minimum wage as required by state law. As of July 1, 2014, the minimum wage in California was increased to $9.00 per hour. This has been in effect throughout the year 2015.

However, beginning on January 1, 2016, the minimum wage in California will once again increase to $10.00 per hour. Certain employees are exempt from the California minimum wage law, including individuals who are the parent, spouse, or child of the employer, outside salespersons, and apprentices regularly indentured under the State Division of Apprenticeship Standards.

There is also an exception for learners, regardless of their age. However, these individuals cannot be paid not less than 85 percent of the minimum wage and rounded to the nearest five cents.  This lower rate only applies during the first 160 hours of their employment in occupations in which they have no previous similar or related experience.

In addition, there are exceptions for employees who are mentally or physically disabled, or both, as well as for nonprofit organizations such as sheltered workshops or rehabilitation facilities that employ disabled workers. Such individuals and organizations may be issued a special license by the Division of Labor Standards Enforcement authorizing employment at a wage less than the legal minimum wage.  

Where to go for Help on Payroll Management Changes and  Questions

It is critical to keep your company safe and your management team informed and in compliance.If you have questions regarding this, or other HR issues and practices, let us help you in managing your HR needs, payroll processes, and staying on top of compliance demands. Get your Free Download: Payroll Outsourcing Guide to help you make an informed decision or call Accuchex Payroll Management Services at 877-422-2824.


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Topics: minimum wage law, overtime pay, california labor laws, california minimum wage

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