Business & Economy

Why more Californians will get overtime pay next year despite federal ruling

Many companies in California have been focused on the federal change and were unaware of the state increase,
Many companies in California have been focused on the federal change and were unaware of the state increase,
KENZO TRIBOUILLARD/AFP/Getty Images

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New federal requirements giving some 4.2 million additional Americans overtime eligibility were abruptly put on hold last week after a federal judge ruled that the Obama Administration overstepped its authority. But despite that, a growing number of California employees will still become eligible for overtime pay next year.

Under California law, employees who make less than $41,600 are eligible for overtime. That figure is based on the minimum wage and represents twice a full-time minimum wage worker's annual salary. Since California's minimum wage will increase in January to $10.50 an hour, the state's overtime threshold will also bump up to $43,680.

“It’s important for (California) employers to remember they have to make this change come Jan. 1,” said Janet Grumer, a partner at Davis Wright Tremaine LLP's employment law department. 

Grumer works with California employers. Many, she said, were not shifting their payrolls to align with the state's 2017 overtime threshold. Instead, they were preparing for the Obama Administration to raise the federal overtime threshold from $23,660 to $47,476. Had that federal law taken effect, it would have surpassed California's threshold, rendering it moot.

Last week, a U.S. district judge blocked the new federal threshold. Employers nationwide pressed pause on the federal changes, and California employers are now shifting to the state's 2017 overtime rules.

The state's minimum wage is set to gradually increase each year through 2022, so in the coming years, the state's overtime threshold will also increase, making more California workers eligible for overtime time.