Bridging the Pay GAP
Last week, GAP announced it would be increasing its minimum wage to $9 in 2014 and $10 in 2015 for employees nationwide. In its press release, GAP’s Chairman and CEO, Glenn Murphy, stated the clothing company “did this because it is right for our company and right for our people.”
Just one step behind, President Obama is continuing to push efforts to increase federal minimum wage to $10.10 per hour – more than a dollar higher than the $9 proposal made in his 2013 State of the Union address. Federal minimum wage has not increased since 2009. In states that don’t mandate a higher rate, federal minimum wage remains $7.25 per hour.
Also last week, President Obama directed the Department of Labor to propose revisions to the Fair Labor Standards Act (FLSA) regulations regarding overtime exemptions. The President asked the Labor Secretary to consider:
- How existing protections can be “modernized” to conform to the intentions of the FLSA
- The changing nature of the workplace
- Simplifying regulations to make them easier to understand by both employees and employers, and easier for employers to apply
This has been interpreted to mean we can expect a proposed:
- Increase in minimum salary paid to an employee for the employee to qualify as exempt (currently, $455 per week); and
- Replacement of the FLSA “primary duty” test with a more substantive test to require an employee to spend a certain percentage of his/her time on exempt duties to qualify for exempt status.
Both of the above changes would substantially decrease the number of employees who qualify under the federal exemption test.
What Does This Mean for California Employers?
Bottom line – not much.
California minimum wage is already going up to $9 per hour as of July 1, 2014, and $10 per hour as of January 1, 2016. Now is a good time for California employers to start gearing up for the increase, including issuing new wage notices pursuant to Labor Code section 2810.5, adjusting overtime calculations, and reviewing exempt employee salaries to ensure they are at least two times the minimum wage ($37,440 as of July 1st).
As for the proposed FLSA changes, California employers are already subject to more narrow overtime exemptions requirements under state law. Among other things, to qualify as exempt in California, an employee must be paid a salary of at least $640 per week ($720 as of July 1st). California employees must also spend more than 50 percent of their weekly work time on exempt duties.
Though there is much debate over proposed changes in federal employment laws, California employers can take some comfort knowing that – in most cases – they are already required to comply with what may be implemented on a national level. Somewhat surprisingly – it would appear California is a trendsetter these days when it comes to changes in national employment law.
Nicole Kamm is a Wage and Hour Defense Lawyer at our firm. She can be reached via email: firstname.lastname@example.org