On November 15, 2024, a federal judge in the Eastern District of Texas blocked the U.S. Department of Labor’s (DOL) recently issued salary rules under the federal Fair Labor Standards Act (FLSA). This rule, which took effect on July 1, 2024, raised the minimum salary threshold for employees to qualify for overtime-exempt status. Had the new salary rules remained in effect, under federal law more employees would have been non-exempt and eligible for overtime pay.
While this decision halts the nationwide implementation of the DOL’s new salary threshold rules, it has minimal impact on California nonprofits. California wage and hour laws already require a higher salary threshold than federal law for an employee to be exempt, even under the recently blocked minimum. Generally speaking, exempt employees must earn a monthly salary equivalent to two times the state minimum wage to qualify as exempt. The minimum salary may not be prorated for part-time work.
Another distinction between federal and state law is that the FLSA permits certain highly compensated employees (HCE) to be exempt. The same is not true in California. The state does not recognize the FLSA’s HCE exemption. It requires all exempt employees to meet both the state minimum salary test and to perform specific duties based on whether they are executive, administrative, or professional employees. If both of these requirements are not met, an employee may not be classified as exempt in California.
If you have any questions about this issue, please contact our Los Angeles, San Francisco, Fresno, San Diego, or Sacramento office. Consortium members are also welcome to reach out with any questions by contacting AskLCW@lcwlegal.com.