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Have Exempt Employees? You Could Be Breaking California Law

Updated on September 24, 2014

Most California business owners have realized the minimum wage increase that went into effect July 2014.

California’s new law raised the statewide minimum from $8 to $9, and will raise it to $10 in 2016. Some business owners saw the increase as nothing to wory about, because many local laws already require a minimum wage above that of the new increase. San Francisco’s minimum wage is $10.74/hr, while San Diego lawmakers are pushing a raise above the new state increase just to name a couple.

If you are in the above category, or even if you have already accommodated the increase, there is still something you don’t want to overlook:. The statewide increase also applies to exempt or “salaried” employees.

California law requires that exempt workers meet a yearly salary requirement which is twice that of a full time hourly employee making minimum wage. So before the increase, the minimum wage for full time exempt employees in CA was $33,280 per year. With California’s increase in effect, the minimum wage for exempt workers is now $37,440 per year. So if your employee’s salary wages are still complying with the 2013 minimum wage, you should make a change soon.

If you’ve found yourself in this situation, we recommend you make adjustments as soon as possible to avoid problems. It’s also a good time to look into preparing for California’s further increases to come. The yearly minimum for salary wages by 2016 will be $41,600.

If you make adjustments now, you will avoid further penalties and back-pay interest. You will also steer clear of potential overtime premium pay for any employee’s loss of exempt status and possible litigation costs. If you have avoided these penalties until now, consider yourself lucky. It’s never too soon to fix.

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