Nicole Rice

California manufacturers should prepare for changes in overtime rules

By Nicole Rice, Policy Director, Government Relations

Capitol Update, Aug. 11, 2017

The U.S. Department of Labor issued a Request for Information (RFI) on the 2016 Obama Administration's Fair Labor Standards Act (FLSA) overtime rule that would raise the current salary threshold for exempt employees from $23,660 to $47,476 and allow it to automatic increase according to the Consumer Price Index.  The RFI solicits feedback on six hotly debated questions: (1) the appropriate salary test level; (2) the duties test; (3) automatic updating of the salary test level; (4) varying costs-of-living across different parts of the nation; (5) inclusion of non-discretionary bonuses and incentive payments to satisfy a portion of the salary level; and (6) the salary test for highly compensated employees. 

Stakeholder comments on the RFI are due by September 25, 2017.  On this schedule, a revised final rule could be released as early as mid-2018. 

Instead of waiting for this process to finish, Assembly Member Tony Thurmond (D-Richmond) has introduced AB 1565 to expedite raising the salary on January 1, 2018 for California exempt employees by the same amount as the federal overtime rule. 

California is already committed to raising the minimum wage well beyond that amount to $62,400 for all exempt employees by 2023.  The Governor and Legislators promised to provide this increase in a predictable and manageable way to preserve growth, keep California’s improving economy stable and not disrupt the operations of job providers.  AB 1565 instead imposes an immediate and significant cost hike of approximately $3700 increase per salaried employee for small manufacturers (25 employees or less) and approximate $1700 increase per salaried employee for manufacturers and with 26 or more employees.

The Senate will act on AB 1565 upon their return from summer recess on August 21st.  Stand with CMTA in opposition to this bill.  Use THIS LINK to Contact your local Senator and ask them to keep their promise to manufacturers by voting “no” on AB 1565.

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