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. 

The minimum wage increase on January 1, 2023 will set the same minimum wage for large and small employers alike, wheras past minimum wage increases only provided for a lower amount required for smaller employers with 25 or fewer employees. 

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

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).