A Texas federal court’s halting of the enforcement of a new federal overtime rule that increases the salary threshold to be considered an exempt employee on Nov. 22, 2016, has received ample press. Under the new Department of Labor rule, employees must be paid a minimum annual salary of $47,476 to achieve federal exempt status from overtime pay requirements — more than doubling the previous salary level of $23,660 — and this salary level will be adjusted automatically every three years. The DOL’s rule was originally slated to take effect on Dec. 1, 2016, but its status continues to be stranded in limbo as it remains unclear as to how the new administration will address the issue. While the preliminary injunction was undoubtedly a victory for employers, they should not start celebrating just yet.
 
The California Legislature recently proposed a bill that tracks the enjoined DOL rule. As drafted, AB 1565 would require an employee to earn a minimum of $3,956 a month (i.e., $47,476 a year), or twice the minimum wage, to qualify for an executive, administrative, or professional employee exemption from California overtime laws. If passed, this bill would speed up the process of meeting the salary threshold contained in the blocked federal overtime rule for all California employers, as the proposed state law does not differentiate between employers with more than 26 employees and employers with less — like the state minimum wage law does. Every employer, regardless of size, would be required to comply with the increased salary threshold by Jan. 1, 2018, if the bill passes.
 
Other states are taking tactics similar to California. For instance, New York adopted a wage order that increased its salary threshold for exempt employees under state law, effective Dec. 31, 2016.
 
The takeaway from these changes in overtime rules at the state level is that employers cannot rely on the status of the DOL rule to ensure compliance with applicable overtime requirements. The stall at the federal level has prompted states to take matters into their own hands and employers around the country should stay on the lookout for similar bills in their state legislatures.

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