Think California’s just-enacted minimum-wage increase only applies to low-paid hourly workers? Think again.

Under a little-noticed provision in state law, every time the minimum wage is increased, the exemption threshold for salaried workers also rises – but at double the annual minimum wage.

Right now, with the minimum wage at $10 an hour, supervisory, managerial, and professional employees must earn at least $41,200 a year to be legally exempt from the state’s hourly pay laws, including overtime pay and meal/rest breaks.

But when the minimum wage hits $15 a year for all employers in the state by 2023, that threshold will have jumped 50 percent as well – all the way to $62,400 a year. (Employers in Los Angeles and other cities where the minimum wage will hit $15 an hour as early as 2020 will have even less time to adapt.)

Any worker earning below $62,400 amount must be paid hourly, get paid time-and-a-half for overtime, and will be required to take regular meal and rest breaks.

Bad options

This is forcing a wrenching choice on many employers. Take Vincent Passanisi, president of Marisa Foods, an Italian deli food maker and restaurant chain in Long Beach. Out of 70 employees at the food manufacturing plant, three are salaried supervisors with annual salaries between $42,000 and $50,000.

Passanisi said that with the minimum-wage increase directly affecting pay for many of his hourly workers, he will not have the budget to increase those supervisors’ salaries to more than $62,000 a year over the next five years.

“I have no choice but to convert these workers to hourly pay,” he said.

And if history is any guide, those employees won’t be happy about it. One big reason: To keep the overall pay the same, Passanisi will be factoring in overtime pay. Because of seasonal variations in production, there are stretches of weeks where plant workers put in a lot of overtime. So he said the base hourly pay rate for those three employees will have to be lowered to keep within payroll budget.

“When I’ve done this for past minimum-wage increases, there has been disappointment and even anger from employees,” Passanisi said.

There are other consequences as well. For example, salaried employees have more flexibility to take time off for a family issue and make up the missed time without incurring overtime; Passanisi said that switching them to hourly pay will mean some requests for time off might have to be denied.

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