Employees Must Receive Salary, Not Daily Rate, to Meet FLSA Executive Exemption

March 09, 2023 | From HRCalifornia Extra

by Sarah Woolston, J.D.; Employment Law Subject Matter Expert, CalChamber

California and federal law require employers to pay employees overtime for work over a certain number of hours, unless the employee meets the criteria for an exemption. In addition to establishing minimum wage and other standards affecting public- and private-sector employees, the federal Fair Labor Standards Act (FLSA) has overtime pay rules. While California has its own rules about overtime pay and how an employee may be exempt from those requirements, some California businesses with out-of-state employees may need to abide by the FLSA.

In a recent case, the U.S. Supreme Court analyzed the FLSA executive exemption and its requirements, specifically looking at whether a “highly compensated employee” was paid on a “salary basis” when his paycheck was solely based on a daily rate received for days he worked during the pay period. Under the FLSA, an employee earning more than $107,432 annually is considered a “highly compensated employee” and has less rigorous exemption criteria than those who earn less than that annual amount.

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