A California Chamber of Commerce-opposed bill that accelerates the minimum salary threshold for exempt employees is awaiting action on the Senate Floor.
CalChamber is opposed to AB 1565 (Thurmond; D-Richmond) because if passed into law, it will significantly increase costs, especially on small employers who currently have a delayed increase under the minimum wage scheduled increases.
Imposes 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 (Leno; D-San Francisco; 2016), all salaried employees in California also got an increase.
Following is a list of the minimum salaries for exempt employees in California under the current schedule of minimum wage increases:
| January 1, 2017: | (Employers with 25 employees or fewer)
(Employers with more than 25 employees) |
$41,600
$43,680 |
| January 1, 2018: | (Employers with 25 employees or fewer)
(Employers with more than 25 employees) |
$43,680
$45,760 |
| January 1, 2019: | (Employers with 25 employees or fewer)
(Employers with more than 25 employees) |
$45,760
$49,920 |
| January 1, 2020: | (Employers with 25 employees or fewer)
(Employers with more than 25 employees) |
$49,920
$54,080 |
| January 1, 2021 | (Employers with 25 employees or fewer)
(Employers with more than 25 employees) |
$54,080
$58,240 |
| January 1, 2022 | (Employers with 25 employees or fewer)
(Employers with more than 25 |
$58,240
$62,400
|
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. As set forth above, 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.
Cumulative Impact of Mandates Is Overwhelming
This proposed increase in exempt employee salaries is on top of other significant mandates with which California-only employers are struggling, including:
- ongoing minimum wage increases;
- agricultural overtime costs;
- paid sick leave;
- extended tax increases, and more.
The cumulative impact of these mandates has already overwhelmed some businesses. Imposing such a significant cost increase as proposed in AB 1565 will limit growth in California.
Action Needed
AB 1565 is awaiting a vote on the Senate Floor. CalChamber is urging businesses to contact their senators and tell them to oppose AB 1565.
Staff Contact: Jennifer Barrera
