2017 Minimum Wage Requirements

2017 will be a year full of changes—especially when it comes to the minimum wage rate. This article covers this year’s wage increases—and which rate governs—the federal state, or local rate. The minimum wage increase also affects the minimum salary threshold for exempt employees. Read on for these important updates!

1. Federal Minimum Wage

The US Department of Labor passed a much anticipated, and hotly debated, regulation which increases the minimum annual salary for exempt employees. The proposed rule would require employers to pay salaried employees $47,476 per year, or $913 per week., whereas the current federal rule requires employers to pay a minimum salary of $23, 660 per year, or $455 per week. We know, that’s a big jump!

However, on Nov. 22, 2016, a federal judge pumped the brakes on the new overtime rule. The judge issued a preliminary injunction, which temporarily halts the implementation of the new rule that was scheduled to take effect on Dec. 1, 2016. This means the future of this rule is uncertain—it could become the law or it might not. Stayed tuned.

What we do know is that, for now, the rule is stopped while litigation continues and the rule cannot be implemented or enforced.

2. California Minimum Wage

Since the federal rule is currently not enforceable, California employers must comply with the state’s minimum salary requirement for exempt employees.  In California, exempt employees must earn a monthly salary of no less than two times the state minimum wage for full-time employment.

Exempt Employee Salary Requirement (Employers with 26 or more employees)

  • California’s minimum wage= $10.50 per hour (as of Jan. 1, 2017)
  • # of hours a full-time employee works in a week = 40
  • Number of weeks in a year = 52
  • Number of hours a full-time employee works in a year = 40 x 52= 2,080
  • Minimum annual salary for a full-time exempt employee beginning Jan. 1, 2017= $10.50 x 2= $21.00 x 2,080 = $43,680 per year
  • Minimum monthly salary for a full-time exempt employee beginning Jan. 1, 2017= $43,680 ÷ 12= $3,640

Exempt Employee Salary Requirement (Employers with 25 or less employees)

  • California’s minimum wage= $10.00 per hour (as of Jan. 1, 2017)
  • # of hours a full-time employee works in a week = 40
  • Number of weeks in a year = 52
  • Number of hours a full-time employee works in a year = 40 x 52= 2,080
  • Minimum annual salary for a full-time exempt employee beginning Jan. 1, 2017= $10.00 x 2= $20.00 x 2,080 = $41,600 per year
  • Minimum monthly salary for a full-time exempt employee beginning Jan. 1, 2017= $41,600 ÷ 12= $3,466.67

Read our article for more on what makes employees “exempt” from overtime pay.

3. Local Minimum Wage

Employers must comply with both state and federal minimum wage laws. Whichever law gives employees a higher wage rate governs.  But, to make it even more complicated, a local entity (a city or a county) may also enact a minimum wage rate that is higher than the state or federal minimum. Therefore, employers must know the federal, state, and local minimum wage rates—and choose whichever one gives the employees more. Here’s a comparison of the minimum wages in each state and here’s a breakdown of the minimum wage increases California’s counties and cities.

Example

The City of San Diego’s minimum wage will increase to $11.50 on January 1, 2017. Since San Diego has a higher wage rate than California’s rate of $10.00  (or $10.50, depending on the amount of employees; see above) and the federal rate of $7.25, San Diego employers must pay their hourly employees a minimum wage of $11.50 beginning January 1, 2017. Note: The exempt minimum salary requirement is based on the current state minimum wage, not any applicable local minimum wage.

We know… it feels a bit like rocket science. As always, don’t hesitate to contact us if you have any questions!

By: Jenna Macek – 12/11/16

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Disclaimer: Although this article may be considered advertising under applicable law and ethical rules, the information in this article is presented for informational purposes only. Nothing herein should be taken as legal advice and this content does not form an attorney-client relationship.

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