While many employees are happy about the upcoming minimum wage increase to $9.00/hour beginning July 1, 2014; many employers may not be aware of the ripple effect that the increase will bring. Apart from the bottom line economic impact, employers need to be wary of the fact that the status of their exempt employees may also be jeopardized. Exempt status is based upon both the "duties performed" and the salary paid. That salary must meet the minimum requirement of "two times the minimum wage for full-time employment". This increase will require a raise for some employees of over $4,000.00 a year in order to maintain their exempt status. The formula "two times minimum wage times full-time employment" leads to the following results:
2 x $8.00/hr x 2080 hours/year = $33,280.00.
The above is the current minimum salary required for exempt employee status.
The new minimum wage will result in the following, commencing July 1st:
2 x $9.00/hr x 2080 hours/year = $37,440.00.
This is an increase of $4,160.00/year which must be paid commencing July 1, or employers will lose the ability to claim that individuals are exempt under the law regardless of what duties they perform or how long they have been classified as exempt.
Employers are advised to carefully review both the base for the exemption (duties and salary) and be sure that their "exempt" employees meet the requirements for exempt status. One of the most prevalent lawsuits filed today are claims of misclassification of individuals as "exempt" when they do not meet either the duties or salary test. The law begins with a presumption that every employee is non-exempt and therefore owed overtime. If an employer wishes an individual to be exempt, they must prove that they fall into one of the few exceptions allowed under law, including the following:
1. Executive exemption (managers)
2. Administrative Assistant exemption (individuals working without direct supervision with discretion and independence)
3. Professional exemption (9 enumerated professions including doctors, lawyers, etc.)
Inside and outside salespeople may also be exempt, but require completely separate tests and employers are advised to seek counsel with regard to their classifications. Misclassifying a worker as exempt and not paying overtime when otherwise due could lead to disastrous effects when claims are filed. Often times, determinations about classification are simple and can be accomplished in only a few minutes on the phone and employers are encouraged to contact our office for assistance.
If you have any questions regarding this or any other employment law matters, please contact Dave Cohen at The Employers' Council.
The Employers' Council
2100 Northrop Ave., Ste. 900
Sacramento, CA 95825
Mel Jones is one of the premier restaurant brokers in the nation having published hundreds of articles on buying and selling a restaurant and bar business, selling thousands of restaurants in CA., WA and AZ and building one of the most copied business models in the brokerage industry. Mel started SellingRestaurants in 2004 with the one simple concept, give the buyers the information they need to make intelligent buying decisions without being pestered by a broker or hiding information, prepare the business for market by researching key details that make or break deals and educate the buyer on the buying process to create an intelligent buyer. Prior to SellingRestaurants, Mel was a Chief Financial Officer for Universal Music Group, the largest music company in the world. There he participated in more than $11.5 billion of merger and acquisition transactions. He also work for top companies such as Nestle Foods, USA. He hold a Bachelors in Business Administration Finance as well as attended Law School at Gonzaga University.