Question: Do we need to be aware of state exemption salary basis rules? Isn’t the federal weekly salary basis of $455 required for all states?
Answer: Not necessarily. Currently two states require a higher salary threshold for white collar exemptions: California and New York. Further, two states permit lower salaries — Washington and Pennsylvania — though this only applies for companies not covered under the Fair Labor Standards Act (FLSA). Accordingly, business decisions should be made with thorough understanding of both state and federal law.
In California, individuals under the primary exemptions (professional, administrative, and executive) must make twice the California minimum wage as the weekly salary basis test (currently $800, not the $455 per week as mentioned in the federal regulations). This translates to $41,600 per year. There are some unique exceptions to this that require job analysis. When a computer professional meets the duties test, the hourly rate of pay is not less than $41.85, or if the employee is paid on a salaried basis, the employee earns an annual salary of no less than $87,185.14 for full-time employment, which is paid at least once a month and in a monthly amount of no less than $7,265.43. Lastly, the teacher exemption should also be reviewed under the state’s labor code when determining compensation for an individual employed as a teacher at a private elementary or secondary academic institution in which pupils are enrolled in kindergarten or any grades ranging from first to twelfth.
New York employers must meet a higher salary test for the white collar exemptions (professional, administrative, and executive). White collar exemptions require a weekly salary basis of 1.5 times the minimum wage (currently $9 per hour). This means an exempt employee must make at least $13.50 per hour, or $540 per week, or $28,080 per year.
While all other states look to the federal guidelines of $455 per week for the white collar exempt salary basis test, it is always a good practice to review state and federal requirements in determination of wage and hour rules. White collar exemption rules are under current consideration, however; an announcement is expected in July 2016. ThinkHR will continue to monitor these changes.