Nationwide Minimum Salary Approved

“You’ve mentioned a new, higher minimum salary coming this year. Has it gone into effect yet and, if so, how much is it?”

Your HR Survival Tip

The federal Department of Labor (DOL) has been batting a new minimum salary around for nearly 2 years and the amount has gone up and down. However, they finally came to a decision and passed the law.

The new minimum salary for exempt employees will be $47,476 per year ($913/week) and goes into effect on 12/1/2016.

As you may remember, legally, a minimum salary means it’s the absolute minimum amount you can pay any exempt employee… regardless of how many or how few hours they work in any week or month. Exempt employees are not eligible for overtime and are expected to have higher level job responsibilities and duties.

And that’s exactly why the DOL decided they needed to make this change. The DOL felt too many employees have been misclassified as exempt when they don’t really meet the duties test (the higher level responsibilities and duties). They figured creating a higher minimum salary would force companies to recognize which positions are truly “worthy” of being exempt.

This new minimum will also affect you in a couple of other ways:

1. If you have been misclassifying your employees and paying them a salary when they should have been hourly, this gives you an opportunity to correct it and blame it on the feds. This is a big deal. If you just change them from exempt to non-exempt, most of the time you are have to reimburse the employee for all their late/missed meal breaks and unpaid overtime. This new law gives you the chance to re-classify the position without having to say it was misclassified. Keep in mind, if you’ve been paying below the CA minimum salary ($41,600), you could still easily get a claim for those meals and OT.
2. Your employees that have been salary and won’t remain salaried will have to start using a timecard and you’ll need to make sure they are taking meal breaks in accordance with CA law. I’ve found many clients already have exempt employees tracking their time for various reasons so the meal break will be the only big change for those employees. You need to be strict about timecards… they’re your primary protection against meal and OT claims.

When this law goes into effect, don’t try to be cheap and pay just the absolute minimum. You’ll regret that decision when you have to pay for unpaid time off just to stay above that minimum. If the position isn’t worth $50,000 to you, bite the bullet and make it a non-exempt (hourly) position. We can help you with this process!