United States: Exempt Employee Pay Minimums Will Increase In 2018 In Various States

As employers wait to see whether – and to what extent – the U.S. Department of Labor will revise the minimum amount they must pay to executive, administrative, and professionals for exemption from the Fair Labor Standards Act's (FLSA) minimum wage and overtime requirements, state-law rates for these employees are scheduled to increase in 2018 (and on New Year's Eve in New York). Also, under some state laws these employees are only exempt from overtime requirements, meaning they still must be paid at least the state minimum wage for all hours worked, and many of those state minimum wage rate are increasing in 2018. Additionally, in 2018 there will be state law increases in the minimum hourly pay required to qualify for state law commissioned employee overtime exemptions that parallel the FLSA's 7(i) retail or service establishment overtime exemption. Below we discuss these pay-related changes in 2018.1

Executive, Administrative, or Professional Exemption Minimum Pay Increases

Under the FLSA, to be considered a bona fide executive, administrative, or professional employee, an individual must be compensated on a salary or fee basis (only for administrative and professional employees) at a rate of not less than $455 per week, excluding board, lodging, or other facilities.2 The $455 a week amount may be translated into equivalent amounts for periods longer than one week: $910 (Bi-weekly); $985.83 (Semi-monthly); $1,971.66 (Monthly); $23,660 (Annual). In various states, the minimum salary or fee amount exceeds the federal rate, and in 2018, pay requirements for these employees will change.

Alaska (January 1): An employee must be paid on a salary or fee basis at a rate of not less than two times the state minimum wage for the first 40 hours of employment each week, excluding employer-furnished board or lodging.

 

2017

2018

Annual

$40,768

$40,934.40

Monthly

$3,397.34

$3,411.20

Semi-Monthly

$1,698.67

$1,705.60

Bi-Weekly

$1,568

$1,574.40

Weekly

$784

$787.20

California (January 1): An employee must earn a monthly salary equivalent to no less than two times the state minimum wage for fulltime employment (employment in which an employee is employed for 40 hours per week). Different rates apply, depending on whether an employer has 26 or more, or 25 or fewer, employees.

26 or More Employees

2017

2018

Annual

$43,680

$45,760

Monthly

$3,640

$3,813.34

Semi-Monthly

$1,820

$1,906.67

Bi-Weekly

$1,680

$1,760

Weekly

$840

$880

25 or Fewer Employees

2017

2018

Annual

$41,600

$43,680

Monthly

$3,466.67

$3,640

Semi-Monthly

$1,733.34

$1,820

Bi-Weekly

$1,600

$1,680

Weekly

$800

$840

Colorado (January 1): An executive or supervisor salaried employee must earn in excess of the equivalent of the state minimum wage for all hours worked in a workweek. The administrative and professional exemptions only require that an employee be a "salaried individual." The below minimum dollar figures for the executive and supervisor exemptions are based on an employee working 40, 50, or 60 hours per week. If an employee works more than 60 hours per week, the required pay will be greater.

 

2017

2018

Annual

Exceed $19,344

Exceed $24,180

Exceed $29,016

Exceed $21,216

Exceed $26,520

Exceed $31,824

Monthly

Exceed $1,612

Exceed $2,015

Exceed $2,418

Exceed $1,768

Exceed $2,210

Exceed $2,652

Semi-Monthly

Exceed $806

Exceed $1,007.50

Exceed $1,209

Exceed 884

Exceed $1,105

Exceed $1,326

Bi-Weekly

Exceed $744

Exceed $930

Exceed $1,116

Exceed $816

Exceed $1,020

Exceed $1,224

Weekly

Exceed $372

Exceed $465

Exceed $558

Exceed $408

Exceed $510

Exceed $612

Maine (January 1): An employee's regular compensation, when converted to an annual rate, must exceed 3,000 times the state minimum wage or the annualized FLSA rate set by the U.S. Labor Department, whichever is higher. Currently, the higher amount is 3,000 times the state minimum wage, which is as follows:

 

2017

2018

Annual

Exceed $27,000

Exceed $30,000

Monthly

Exceed $2,250

Exceed $2,500

Semi-Monthly

Exceed $1,125

Exceed $1,250

Bi-Weekly

Exceed $1,038.46

Exceed $1,153.84

Weekly

Exceed $519.23

Exceed $576.92

New York (December 31, 2017 & 2018): An executive or administrative employee must be paid a salary for services, including board, lodging, or other allowances and facilities. The professional exemption does not include a salary requirement. For the executive and administrative exemptions, different rates apply, based on location and how many employees an employer has. Additionally, be aware that New York's rate changes occur on December 31, not January 1, so two different rates will apply in 2018.

New York City (11 or More Employees)

2017

December 31, 2017

December 31, 2018

Annual

$42,900

$50,700

$58,500

Monthly

$3,575

$4,225

$4,875

Semi-Monthly

$1,785.50

$2,112.50

$2,437.50

Biweekly

$1650

$1,950

$2,250

Weekly

$825

$975

$1,125

New York City (10 or Fewer Employees)

2017

December 31, 2017

December 31, 2018

Annual

$40,950

$46,800

$52,650

Monthly

$3,412.50

$3,900

$4,387.50

Semi-Monthly

$1,706.25

$1,950

$2,193.75

Biweekly

$1,575

$1,800

$2,025

Weekly

$787.50

$900

$1,012.50

Nassau, Suffolk & Westchester Counties

2017

December 31, 2017

December 31, 2018

Annual

$39,000

$42,900

$46,800

Monthly

$3,250

$3,575

$3,900

Semi-Monthly

$1,625

$1,787.50

$1,950

Bi-Weekly

$1,500

$1,650

$1,800

Weekly

$750

$825

$900

Remainder of State

2017

December 31, 2017

December 31, 2018

Annual

$37,830

$40,560

$43,264

Monthly

$3,152.50

$3,380

$3,605.34

Semi-Monthly

$1,576.25

$1,690

$1,802.67

Bi-Weekly

$1,455

$1,560

$1,664

Weekly

$727.50

$780

$832

Oregon (July 1): An employee must earn a salary and be paid on a salary basis, excluding board, lodging, or other facilities. A salary is no less than the state minimum wage multiplied by 2,080 hours per year, then divided by 12 months. It is a predetermined amount constituting all or part of the employee's compensation paid for each pay period of one week or longer (but not to exceed one month). Different rates apply, based on location, and the rates change on July 1 of each year.

General

2017

2018

Annual

$20,280 (1/1)

$21,320 (7/1)

$22,360 (7/1)

Monthly

$1,690 (1/1)

$1,776.67 (7/1)

$1,863.33 (7/1)

Semi-Monthly

$845 (1/1)

$888.34 (7/1)

$931.67 (7/1)

Bi-Weekly

$780 (1/1)

$820 (7/1)

$860 (7/1)

Weekly

$390 (1/1)

$410 (7/1)

$430 (7/1)

Urban

2017

2018

Annual

$20,280 (1/1)

$23,400 (7/1)

$24,960 (7/1)

Monthly

$1,690 (1/1)

$1,950 (7/1)

$2,080 (7/1)

Semi-Monthly

$845 (1/1)

$975 (7/1)

$1,040 (7/1)

Bi-Weekly

$780 (1/1)

$900 (7/1)

$960 (7/1)

Weekly

$390 (1/1)

$450 (7/1)

$480 (7/1)

Non-Urban

2017

2018

Annual

$19,760 (1/1)

$20,800 (7/1)

$21,840 (7/1)

Monthly

$1,646.67 (1/1)

$1,733.34 (7/1)

$1,820 (7/1)

Semi-Monthly

$823.34 (1/1)

$866.67 (7/1)

$910 (7/1)

Bi-Weekly

$760 (1/1)

$800 (7/1)

$840 (7/1)

Weekly

$380 (1/1)

$400 (7/1)

$420 (7/1)

Connecticut and Iowa (Currently): Although the minimum pay requirements are not currently scheduled to increase in 2018 in Connecticut or Iowa, under both states' "short test" an employee must be compensated on a salary or fee basis – excluding boarding, lodging, or other facilities – in excess of the federal rate: $475 per week in Connecticut, and $500 per week in Iowa.

Arizona, New Jersey, Rhode Island, South Dakota (January 1):  In these states (and others), the exemptions for executive, administrative, or professional employees do not exempt the employee from minimum wage. The minimum wage in these four states will increase on January 1, 2018:3 Arizona ($10.50); New Jersey ($8.60); Rhode Island ($10.10); and South Dakota ($8.85).

Commissioned Employee Overtime Exemption Minimum Pay Increases

To qualify under the FLSA's 7(i) overtime exception, a retail or service establishment employee's regular rate of pay must exceed one-and-a-half times the federal minimum wage, and more than half the employee's compensation for a representative period (not less than one month) must represent commissions on goods or services. In the following states, the 7(i)-type exemption requires – in part – an employee's pay to either equal or exceed one-and-a-half times the state minimum wage.

California: An employee's earnings must exceed one-and-a-half times the state minimum wage, which on January 1, 2018, will increase to $11.00 per hour for employers with 26 or more employees and to $10.50 per hour for employees with 25 or fewer employees.

Colorado: An employee's regular rate of pay must be at least one-and-a-half times the state minimum wage, which on January 1, 2018, will increase to $10.20 per hour.

District of Columbia: An employee's regular rate of pay must exceed one-and-a-half times the district minimum wage, which on July 1, 2018, will increase to $13.25 per hour.

Minnesota: An employee's regular rate of pay must exceed one-and-a-half times the state minimum wage, which on January 1, 2018, will increase to $9.65 per hour for employers with $500,000 in annual gross sales, and to $7.87 per hour for employers with less than $500,000 in annual gross sales and certain hotels.

Nevada: An employee's regular rate must exceed one-and-a-half times the state minimum wage, which potentially could increase on July 1, 2018, from $8.25 per hour if an employer does not offer health benefits or $7.25 per hour if health benefits are offered.

New York: The general wage order4 provides – in part – that employers must pay an employee for overtime at a wage rate of one-and-one-half times the employee's regular rate in the manner and methods provided in and subject to the exemptions of section 7 of the FLSA. However, it is unclear whether payment is based on the federal or state minimum wage. If the state minimum wage, it will increase on December 31, 2017 ("2017"), and on December 31, 2018 ("2018"). In New York City, the minimum wage applicable to employers with 11 or more employees will increase to $13.00 (2017) and $15.00 (2018); the rate for employers with 10 or fewer employees will increase to $12.00 (2017) and $13.50 (2018). The minimum wage in Nassau, Suffolk, and Westchester Counties will increase to $11.00 (2017) and $12.00 (2018). Finally, in the remainder of New York State, the minimum wage will increase to $10.40 (2017) and $11.10 (2018).

Oregon: An employee's regular rate of pay must exceed one-and-a-half times the state minimum wage, which on July 1, 2018, will increase to $10.75 per hour (general), $12.00 per hour (urban), and $10.50 per hour (non-urban).

Washington: An employee's regular rate of pay must exceed one-and-a-half times the state minimum wage, which on January 1, 2018, will increase to $11.50 per hour.

Connecticut: Connecticut has a state minimum wage that exceeds the FLSA rate – $10.10 per hour – and, in its 7(i)-type exception, pay – in part – is pegged to the state minimum wage (regular rate of pay exceeds two times that rate), but it does not currently have a 2018 minimum wage increase scheduled.

The Above Rates (or Other Rates) May Change

Above we have discussed known pay increases that will occur at the state level in 2018. As indicated, the U.S. Department of Labor is considering revising the white collar employee pay requirements. Also, the above state rates may change through legislative or regulatory action, local municipal requirements may be enacted or amended, and states not discussed in this article could change their pay requirements. As we have regularly noted in our monthly minimum wage and overtime update series – WPI Wage Watch – various states have proposed increasing either the minimum wage or the minimum salary or fee amount that must be paid to qualify as exempt executive, administrative, or professional employees. Accordingly, we recommend employers stay apprised of developments via WPI Wage Watch and consult with counsel to confirm rates have not changed since publication.

Footnotes

1 The pay-related requirements discussed in the article are one requirement – of many – that must be satisfied for an employee to be considered exempt under the executive, administrative, professional, or commissioned employee exemptions. The additional requirements are not noted in this article. If you have questions about whether an employee qualifies as exempt, please contact knowledgeable labor and employment counsel.

2 This is the rate currently in effect assuming that the Obama administration's 2016 increase remains invalidated by a judgment against the government that is currently on appeal.

3 Also, in Arizona and Illinois, there are local minimum wage rates that exceed the state rate. On January 1, 2018, the minimum wage in Flagstaff, AZ will increase to $11.00 per hour. On July 1, 2018, the minimum wage in Chicago and Cook County, IL will increase to $12.00 and $11.00 per hour, respectively. In Nevada, the state minimum wage potentially could increase on July 1, 2018, from $8.25 per hour if an employer does not offer health benefits or $7.25 per hour if health benefits are offered.

4 The commissioned employee exemption is not incorporated or available in the building services and hospitality industry wage orders.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Sebastian Chilco
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