Wage Law

Now that the California minimum wage has increased to $10 per hour as of January 1, 2016, California employers must also pay more to keep exempt workers exempt. In addition to the Duties Test, California employers who classify workers as salaried exempt must meet the Salary Test. Among other things, this means that the salary must be no less than double the minimum wage for full time work.

A full-time minimum wage earner now makes $20,800 per year. Thus, a salaried exempt worker must be paid at least $41,600 annually to meet the California standards ($10 per hour x 40 hours per week x 52 weeks per year, doubled).

Failure to meet this standard can prove costly, even if an employee only works an extra 30 to 60 minutes per day. A worker who is misclassified as exempt who works an extra 45 minutes a day, at $40,000 a year, would accrue an overtime liability of $5,625 per year. Employees can reach back four years under California's statute of limitations, so that could grow to $22,500 over four years, for just one worker. Make the same mistake with a staff of 45 employees and you're looking at a seven figure liability.