CalChamber-Opposed Bill Accelerates Salary Threshold for Exempt Employees

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
employees)

$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

Jennifer Barrera took over as president and chief executive officer of the California Chamber of Commerce on October 1, 2021. Previously, she oversaw the development and implementation of policy and strategy as executive vice president and represented the CalChamber on legal reform issues. She led CalChamber advocacy on labor and employment and taxation from September 2010 through the end of 2017. As senior policy advocate in 2017, she worked with the executive vice president in developing policy strategy. Before joining the CalChamber, she worked at a statewide law firm that specializes in labor/employment defense. Barrera earned a B.A. in English from California State University, Bakersfield, and a J.D. with high honors from California Western School of Law. See full bio.