A bill which could have detriments effect on small business owners is currently on the Senate Floor which would accelerate the minimum salary threshold for exempt employees. If AB 1565 passes into law, it would significantly increase costs, especially on small employers. As written, AB 1565 could impose a $3,700 increase per exempt salaried employee on small businesses.
Currently, all exempt, salaried employees in California must earn no less than two times the existing minimum wage, plus satisfy the “duties test,” in order to be exempt from various wage and hour mandates such as overtime, meal periods and rest breaks. Due to the recent minimum wage increase as enacted by SB 3, all salaried employees in California also got an increase.
The California Chamber of Commerce has published a list of the minimum salaries for exempt employees in California under the current schedule of minimum wage increases. Please do not hesitate to ask us if you would like a copy of the schedule.
AB 1565 proposes to accelerate the salary increases by requiring all employers to pay an exempt employee a minimum of $47,472 on January 1, 2018. AB 1565 does not distinguish between employers with 25 or fewer employees and employers with 26 or more employees, as SB 3 did when enacting the scheduled minimum wage increases. Rather, the significant increase in AB 1565 is applicable to all employers. Under current law, small employers would not reach this threshold until 2020.
Under AB 1565, small businesses will face a $3,792 increase per salaried employee in 2018 and employers with 26 or more employees will face an increase of $1,723 per employee. There is no justification to increase costs on small and large employers by altering the schedule of increases for salaried employees already provided in SB 3. AB 1565 is awaiting a vote on the Senate Floor. If this effects your business, you are urged to contact your senators and tell them to oppose AB 1565.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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