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Non-Exempt, High Wage Earners Might Be Saying Goodbye to Overtime

April 13, 2015 Legal Team

Another employment bill is working its way through the state legislature, but this time, it may not be so helpful to plaintiff litigation. Assembly Bill (AB) 1470 serves as an amendment to Labor Code by adding section 510.5 regarding overtime exemptions.

Generally, if an employee is a high wage earner making six figures annually, it is presumed that he or she is an exempt employee. Though this is not always the case (i.e. pharmacists, computer engineers, paralegals, etc.), it has been an unspoken rule. AB 1470, however, seeks to transform that unspoken rule into a real part of the labor code.

Assembly Member Luis Alejo for the 30th District of California introduced the bill at the end of February. It seeks to make employees who earn a gross annual compensation of at least $100,000 automatically exempt from overtime if he or she engages in at least one professional, administrative, or executive exemption duty.

What does this mean? Let’s use a paralegal as an example. Sarah the paralegal has been certified for ten years and works for a large insurance defense law firm. She is classified currently as a non-exempt, hourly employee who makes $50 per hour, which means she makes about $104,000 per year, give or take a few thousand for overtime or an unpaid day off. Typically, under the Industrial Welfare Commission Wage Orders, she does not fulfill any sort of exemption. However, with AB 1470, Sarah fulfills this new kind of exemption. First, Sarah makes at least $100,000 annually. Second, Sarah meets at least one requirement of exemption under “professional exemption.” She is “a person employed in a professional capacity…who is licensed or certified by the State in California is primarily engaged in the practice of…law.” Therefore, she could be exempt under AB 1470.

Stay tuned to see if AB 1470 gains the traction it needs to pass and become law.