Mandatory Overtime Rules: California Will Continue to March to the Beat of its Own Drummer

January 06, 2017

By Craig Kessler, SCGA Government Affairs Director

When U.S. District Court Judge Amos Mazzant III blocked the Obama Administration’s bid to expand overtime pay restrictions just before they were set to go into effect December 1 a huge sigh of relief was heard across the land. The November 8 election had pretty well established that a Trump Administration would reverse course come January 20, 2017, but having to follow a radically different standard for the number of weeks it would take to get from Obama’s point A to Trump’s point B would have caused great confusion.

Currently the Federal Government requires that the 50 states deem workers who earn $23,738 dollars or less as “hourly” for the purposes of mandating overtime pay for more than 8 hours worked in any one day or 40 hours worked in any one workweek. The authority to regulate the matter is found in the 1938 Fair Labor Standards Act, which initially established a 44-hour workweek. Over the decades the 1938 Act was amended to set today’s 8/40 schedule and establish mandatory overtime pay for workers deemed “hourly” or non-managerial. The Act did NOT originally establish specific income thresholds for making that “hourly” determination. It initially distinguished between hourly workers and managerial workers based upon the duties they performed, but it also contained language that delegated some interpretive authority to the Executive Branch. The income threshold became standard practice when it was added by the Nixon Administration in the early 1970’s. It was raised to the $23,738.00 level in 2004.

Per the same political dynamic that had caused a large number of states, including some very “Red” ones, to raise their minimum wages to levels well above the minimum standard established by Congress per that same 1938 Act, the Obama Administration’s Labor Department sought to use the Administrative Law Rule-Making process to raise by Rule the income threshold established by previous Congresses and Labor Departments. The theory: The nation’s “hourly” workers were in line for a long overdue raise in keeping with the raises accorded minimum wage workers and a political Zeitgeist obsessed with the deleterious effects of wage and wealth inequality. The Obama Labor Department initially sought to peg a new income threshold close to $60,000.00 per year but eventually landed on $47,476.00 after incorporating the input of the U.S. Chamber of Commerce and other business lobbies. Okay then, it’s back to $23,738.00, right? Not so fast; it depends upon where you do business. The United States is a federated system with a national government that exercises “enumerated powers.” It can set minimum standards, but individual states can exceed them. And exceed them California most definitely does in more ways than almost any state in the Union. California has long had a firmly established income threshold for the determination of who qualifies for mandatory overtime pay. And it is a very simple one: Those earning double the current state minimum wage or less are deemed “hourly” for the purposes thereof. Thus, those earning $41,600.00 or less are “hourly” in California for the remainder of 2016. On January 1, 2017 that threshold goes up to $43,680.00. To give you an idea of where it is slated to go between now and December 31, 2022, refer to the chart below and do the arithmetic.

January 1, 2017 $10.50

January 1, 2018 $11.00

January 1, 2019 $12.00

January 1, 2020 $13.00

January 1, 2021 $14.00

January 1, 2022 $15.00

Although no can know where the California political Zeitgeist is headed during these “out” years, if November 8 was the first indicator, the trajectory is firmly in the direction of a much deeper shade of “Blue.” The Democrats captured the three (3) State Assembly seats necessary to resume 2/3 control of the Lower House and the one (1) Senate seat necessary to resume 2/3 control of the Upper House. Virtually all of the tax and debt incursion initiatives on the state and local ballots passed by overwhelming margins. Hillary Clinton’s margin of victory over Donald Trump was even greater than those racked up by President Obama, John Kerry and Al Gore; indeed, Clinton carried California’s “white male” vote by 15 percentage points. And every state constitutional office and both United States Senate Seats remained firmly in the grip of Democrats.

So, while there will indeed be some changes in store for the California golf industry as a result of the national election – the EPA will become a benign regulatory presence, federally regulated waters will be managed to favor storage over environmental remediation, and wherever Federal Agencies pre-empt state law those pre-emptions promise to provide less onerous regulatory compliance cum mandates – mandatory overtime rules won’t be one of them.