Today the minimum wage increase passed last year went into effect. All workers in California must earn at least $9 per hour. Another increase to $10 per hour is currently scheduled under the law to take place on January 1, 2016. What is especially important to understand and often overlooked by employers is the fact that salaried employees wages and commissioned employees wages are tied to the minimum wage if they are to be classified as exempt from overtime. An exempt administrative, executive or professional employee must be paid a weekly salary of at least $720 per week to be classified as exempt. If the salary paid excluding bonuses or commissions is less than $720, which must be a guaranteed amount, then overtime exemption will be lost.
In addition a commissioned employee must earn at least $13.50 per hour (1 1/2 times the minimum) for ALL hours worked in order to be exempt from overtime. Commissioned employees must be provided meal and rest breaks even if they are exempt from overtime. Additionally, even if paid $13.50 per hour for all hours worked, in addition, 1/2 of the compensation must come from commissions. If less than 1/2 the compensation comes from commissions then the overtime exemption will be lost.
We at Kingsley & Kingsley as in past minimum wage increases expect numerous employers to fail to raise their commissioned and salaried employees as required to be exempt from overtime. This will subject employers to significant overtime exposure that over time can translate into thousands of dollars for each employee who is paid incorrectly. This is an area of the law we are going to to continue to monitor very carefully.