On July 27, 2022, California’s Department of Finance confirmed that due to the raising inflation, the minimum wage for all employers will increase by 3.5% to $15.50 per hour on January 1, 2023.

California’s minimum wage not only impacts minimum wage workers, but it also effects the salary required for employees to qualify as an exempt employee.  Here are five reminders about the California minimum wage increase and its impact upon exempt employees:

1.  As of January 1, 2023, the minimum wage in California will increase to $15.50 for all employers – large and small.

The minimum wage increase on January 1, 2023 will set the same minimum wage for large and small employers, unlike recent minimum wage increases which provided for a lower amount required for smaller employers with 25 or fewer employees.  The increase on January 1, 2023 will be especially hard for small employers given the $1.50 increase in minimum wage (increase from the current $14.00 per hour) for these companies.

2.  With the increase in the state minimum wage, there is a corresponding raise in the minimum salary required to qualify as exempt under the “white-collar” exemptions. 

To be exempt from the requirement of having to pay overtime to the employee, the employee must perform specified duties in a particular manner and be paid “a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.” (Lab. Code, § 515, subd. (a).)  Therefore, on January 1, 2023, to qualify for a white-collar exemption, the employee must receive an annual salary of at least $64,480 annually ($1,240 weekly) for all employers.

3.  The salary for exempt employees must be a guaranteed, fixed amount.

The employee’s salary cannot be reduced for quality or quantity of work.

4.  To qualify as an exempt employee, the employee must perform more than 50% of their time performing exempt duties.

More information about the types of duties that qualify for the white-collar exemptions can be read here.

5.  Employers bear the burden of proof when establishing that an employee qualifies as an exempt employee.

Employers have the burden of proof when an employee challenges an exempt classification.  California courts have made clear that the employer bears the burden of proof when asserting that an employee is an exempt employee:  “[T]he assertion of an exemption from the overtime laws is considered to be an affirmative defense, and therefore the employer bears the burden of proving the employee’s exemption.”  Ramirez v. Yosemite Water Co. (1999).