California Overtime: Changes with New Presidency?

Washington, DCAt least one labor law attorney predicts that no California overtime changes will occur anytime soon with the new presidency, although there is some speculation of abolishing the “final overtime rule”.

Labor law experts indicate that significant changes to overtime law, if any, would happen at a federal level. But in all likelihood, California employers and employees would be the least affected by any changes because labor laws in the state are amongst the most stringent in the country and they have been set to protect California employees. Even if overtime changes are made under the new administration, workers won’t necessarily be affected because California overtime laws—and minimum wages--are more generous to employees than federal law. (Although it will take a few years, New York and California are among the first states to raise the minimum wage to $15 per hour. California is now second only to Washington, D.C., where minimum wage is $11.50 per hour.)

New legislation that could have made 4.2 million employees eligible for overtime was blocked last November by a federal judge in Texas. The Department of Labor rule that the final overtime law, supposed to take effect December 1, 2016, meant that certain exempt and salaried employees would have their income almost doubled or they would get paid an hourly wage and become eligible for overtime. The law would have required companies to pay overtime to their workers who work more than 40 hours per week but made under $47,476 per year. Under current law, employers are not required to pay overtime to salaried/exempt workers if they make more than $23,660.

The sudden reversal at the end of 2016 left many small business owners in a quandary, some of whom had already re-classified their workers to hourly status or increased salaries in order to avoid overtime changes. And this issue does affect businesses in California. For instance, Fortune Magazine (Nov 2016) reported that Bryan Pate, CEO of Elliptigo, a bicycle manufacturer in San Diego with 22 employees said that, due to changes in overtime regulations, workers must be paid hourly rather than give them salaried positions.

Although the DOL is appealing the judge’s decision, it could take months. And not knowing the outcome has left businesses like Elliptigo in limbo. According to attorney Sara Boynsis, with Fenton & Keller in Monterey, the DOL will likely abandon the appeal after Trump announced that Andrew Puzder, a critic of minimum wage increases, is the new secretary of labor. “Therefore, if employers have not already implemented changes to exempt employee salaries or classifications in response to the DOL rule, they should continue to follow the California overtime exemption and employee classification laws,” she told the Monterey Herald.

Puzder argued that Obama’s rule to expand overtime for millions of workers “diminishes opportunities for workers, and that significant minimum wage increases would hurt small businesses and lead to job losses,” according to the New York Times. On the other hand, Puzder said he was “ not opposed to raising the minimum wage rationally; I’m opposed to raising it to the point where lower-skilled workers, working-class Americans, young people, minorities, are losing the jobs they need to get on the ladder of success.” Only time will tell if he will be have the workers’ interests first and foremost.