California Increases Pay Requirements and Expands Certain Protections

Not all of the increased pay requirements of the expanded protections will apply to your company.  I suggest you review them to make sure which do and which do not apply.

California recently increased pay requirements and expanded certain protections.   Many of these provisions will not apply to your business but you should review them just in case.

Effective January 1, 2017, California increases the minimum pay rates for certain exemptions and expands protections under certain nondiscrimination laws. Read on to learn more.

California Raises Minimum Pay Requirements for Certain Exemptions

The California Department of Industrial Relations has announced an increase to the pay rates computer software employees and physicians must receive in order to be exempt from overtime. The new rates are effective January 1, 2017. Additionally, the minimum salary required for the administrative, professional, and executive exemptions will increase for some employers at the start of the year.


Under California Labor Code Sections 515.5 and 515.6, computer software employees and physicians are exempt from the state's overtime requirements if they meet specific duties requirements and earn a certain rate of pay. The pay thresholds are adjusted annually for inflation.

California also has exemptions for bona fide administrative, professional, and executive employees. To be exempt from overtime, these employees must meet certain state salary and duties tests. In California, these exempt employees must be paid a salary of at least twice the state minimum hourly wage based on full-time employment of 40 hours per workweek. The state's minimum wage will increase on January 1, 2017 for some employers.

Computer Software Employees:

Computer software employees may be paid on an hourly or a salary basis to qualify for exemption from California's overtime requirements. Beginning January 1, 2017, to qualify for exemption computer software employees must earn at least:

  • $42.39 per hour (for all hours worked);
  • A monthly salary of $7,359.88; or
  • An annual salary of $88,318.55.


To qualify for exemption from the state's overtime requirements in 2017, licensed physicians and surgeons are required to earn an hourly wage of at least $77.23.

Administrative, Professional, and Executive Employees:

For employers with 26 or more employees, the minimum salary required under state lawfor the administrative, professional, and executive exemptions from overtime will increase to $840 per week on January 1, 2017, as a result of a new state minimum wage of $10.50 per hour. For employers with fewer than 26 employees, the state's minimum salary for these exemptions will remain at $800 in 2017.

Note: These amounts will be lower than the minimum salary required for exemption under federal law, which will increase to $913 per week on December 1, 2016. Any exempt employee in California who earns equal to or more than the state minimum salary but less than the federal minimum salary will be entitled to overtime for work performed in excess of 40 hours in a workweek (but not when overtime is required by state law but not federal law, such as hours worked in excess of eight in one workday). In these circumstances, California employers may want to consider increasing these employees' salaries to meet the federal minimum (as long as the employee still meets the duties test for the exemption). 

Compliance Recommendations:

California employers that intend to classify employees as exempt from overtime under one of these exemptions should ensure employees meet the applicable salary and duties tests by January 1, 2017. Otherwise, these employees must be classified as non-exempt and are entitled to overtime.

California Expands Equal Pay Protections

California has enacted two pieces of legislation that expand the state's Equal Pay Act.


California's Equal Pay Act prohibits an employer from paying any of its employees less than employees of the opposite sex for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions. There are exceptions to this rule if the wage differential is based upon a:

  • Seniority or merit system;
  • System that measures earnings by quantity or quality of production; or
  • Bona fide factor other than sex, such as education, training, or experience. The employer must demonstrate that the factor is not based on sex, is job related and is consistent with a business necessity.

To be covered by an exception, employers must apply each factor on which it relies reasonably. Additionally, the factors relied upon must account for the entire wage differential.

Senate Bill 1063:

Effective January 1, 2017. Senate Bill 1063 amends the Equal Pay Act to also prohibit employers from paying their employees less than employees of another race or ethnicity for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions. The exceptions outlined above apply to wage differentials related to race and ethnicity as well.

Assembly Bill 1676:

Effective January 1, 2017, Assembly Bill 1676 specifies that prior salary cannot, by itself, justify any disparity in compensation.

Compliance Recommendations:

California employers should review their policies and practices to ensure compliance with Assembly Bill 1676 and Senate Bill 1063.

California Expands Protections Related to I-9 Documentation

California has enacted legislation (Senate Bill 1001) that prohibits employers from taking certain actions when verifying a new hire's identity and work authorization. Senate Bill 1001 is effective January 1, 2017.


Federal law requires employers to verify the identity and work authorization of all new hires by completing and retaining the I-9 Form. The form includes a list of documents that are accepted to verify a worker's identity and/or work authorization.

Senate Bill 1001:

Senate Bill 1001 amends California law to expressly prohibit employers from:

  • Requesting more or different documents than are required by federal law.
  • Refusing to honor documents that on their face reasonably appear to be genuine.
  • Refusing to honor documents or work authorization based upon the specific status or term of status that accompanies the authorization to work.
  • Attempting to reinvestigate or re-verify an employee's authorization to work using an unfair immigration-related practice.

Compliance Recommendations:

California employers should review their new hire procedures to ensure compliance with Senate Bill 1001. Anyone involved in completing the I-9 on behalf of the employer should be trained on the law.