Exempt-Salary Changes: Adjustments Are Coming in 2019


 

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Minimum-wage increases that are to occur in more than one-third of U.S. states by Jan. 1, 2019, are to trigger in several states additional wage-related changes, such as adjustments to income withholding or statutory exemption thresholds.

Employers should be aware of these changes to avoid starting 2019 subject to enforcement actions.

At least 19 states have wage changes that are to take effect by Jan. 1: Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Maine, Massachusetts, Minnesota, Missouri, Montana, New Jersey, New York, Ohio, Rhode Island, South Dakota, Vermont, and Washington.

Garnishment Exemption Amounts to Rise

Essentially, statutory exemptions from withholdings reduce the amount that may be garnished.

Under federal law, a worker’s minimum disposable earnings must be 30 times the federal minimum wage ($7.25 an hour, $217.50 a week) before a garnishment may be deducted.

Some states multiply the federal minimum wage by more than 30 hours, using 35, 40, or 50 hours instead. 

Other states substitute the state minimum wage or a fixed amount for the federal minimum wage in their calculations, which is allowable if the result is at least 30 times the federal minimum wage. 

In states that use the state minimum wage to calculate statutory exemptions from withholdings, such as California, Colorado, Maine, and New York, employers must ensure their calculations reflect the new minimum wage by the first pay day that occurs on or after the adjustment. 

California’s statutory exemption from garnishment is 40 times the state minimum wage.

When California’s hourly minimum wages rise Jan. 1, 2019, to $12 or $11, depending on whether the employer has at least 26 employees or fewer than 26 employees, respectively, the statutory exemption for creditor garnishments is to rise to $480 and $440, from $440 and $420.

In Colorado, the garnishment exemption amount is 30 times the greater of either the state or federal minimum wage. With the minimum wage increase to $11.10 from $10.20 on Jan. 1, the statutory exemption for garnishments is to rise to $333 from $306.  

In Maine, the amount exempt from garnishment is 40 times the greater of the state or federal minimum wage. When the state’s minimum wage rises to $11 from $10 on Jan. 1, 2019, the statutory exemption is to rise to $440 from $400.

New York requires an exemption of 30 times the state or the federal minimum wage, so the state’s Dec. 31, 2018, minimum wage increase is to be accompanied by a statutory exemption increase that varies according to the different minimum wages that are to take effect.

For New York City employers with at least 11 employees, the wage is to be $450, based on a $15 minimum wage. For New York City employers with fewer than 11 employees it is to be $405, based on a $13.50 minimum wage. For employers in Nassau, Suffolk, and Westchester counties, it is to be $360, based on a $12 minimum wage. For employers in the rest of the state, it is to be $333, based on an $11.10 minimum wage.

Changes to Executive, Professional Overtime Exemptions

To be considered a bona fide executive, administrative, or professional employee under the Fair Labor Standards Act, workers must be compensated on a salary or fee basis at a rate of not less than $455 (week), $1,971.66 (monthly), or $23,660 (annually), excluding board, lodging, or other facilities.

In some states, the minimum salary or fee amount exceeds the federal rate, and in 2019, pay requirements for  these employees will change.

In Alaska, executive, administrative, and professional employees must earn at least twice the state’s minimum wage per 40-hour work week, excluding employer-furnished board or lodging, to be exempt from overtime.

After Alaska’s minimum wage rises Jan. 1 to $9.89 from $9.84, this amount may be translated into compensation increases to $791.20 from $787.20 (weekly); to $3,428.53 from $3,411.20 (monthly); and to $41,142.40 from $40,934.40 (annually).

California’s salary threshold to qualify as an overtime-exempt executive, administrative, or professional employee is twice the minimum wage for weekly full-time employment of more than 40 hours. 

On Jan. 1, 2019, California’s minimum salary thresholds for overtime-exempt employees are to rise for employers having at least 26 employees to $960 from $880 (weekly); to $4,160 from $3,813.34 (monthly); and to $49,920 from $45,760 (annually).

For employers having no more than 25 employees, the threshold changes to $880 from $840 (weekly); to $3,813.34 from $3,640 (monthly); and to $45,760 from $43,680 (annually).

Also effective Jan. 1, California's computer-software employees are to be exempt from overtime requirements if they earn at least $45.41 an hour, $7,883.62 a month, or $94,603.25 a year, and licensed physicians and surgeons are exempt if they earn at least $82.72 an hour   (increases for computer-software employees from $43.58 an hour, $7,565.85 a month, or $90,790.07 a year, and licensed physicians and surgeons from at least $79.39 an hour in 2018).     

In Colorado, executive or supervisory salaried employees are exempt if they earn a salary in excess of the minimum wage for all hours worked in a workweek.

Colorado’s administrative and professional exemptions only require that employees be salaried. When the state’s hourly wage increases on Jan. 1 to $11.10, the exemption amount for those working 40 hours is a salary that exceeds $444, weekly; $1,924, monthly; and $23,088, annually (increases from $408, weekly; $1,768, monthly; and $21,216, annually).

In Maine, when the hourly minimum wage rises to $11 on Jan. 1, an employee’s regular compensation, when converted to an annual rate, must exceed 3,000 times the greater of either the state minimum wage or the annualized FLSA amount ($23,660).  Currently, the greater amount is 3,000 times the state minimum wage.

In 2019, the exemption threshold is to be compensation that exceeds $634.61, weekly; $2,750, monthly; and $33,000, annually (increases from $576.92, weekly; $2,500, monthly; and $30,000, annually).

In New York, executive or administrative employees must be paid a salary for services, including board, lodging, or other allowances and facilities. Different rates apply for the executive and administrative exemptions and are based on employer size and location. The professional exemption does not include a salary requirement.

On the first day of the workweek in which Dec. 31, 2018, occurs, employers should adjust salaries as needed to align to the new exemption thresholds that are to take effect, thereby retaining the relevant exemptions.

From Dec. 31, 2018, through Dec. 30, 2019, the exemption amount that applies for New York City employers of at least 11 employees is to be $1,125 weekly; $4,875 monthly; and $58,500, annually (increases from $975, weekly; $4,225, monthly; $50,700, annually).

The exemption amount that applies for New York City employers of no more than 10 employees is to be $1,012.50, weekly; $4,387.50, monthly; and $52,650, annually (increases from $900, weekly; $3,900, monthly; $46,800, annually).

The exemption amount that applies for employers in Nassau, Suffolk, and Westchester counties is to be $900, weekly; $3,900, monthly; and $46,800 annually (increases from $825 a week; $3,575, monthly; and $42,900, annually).

The exemption amount that applies in the remainder of the state is to be $832, weekly; $3,605.34, monthly; and $43,264, annually (increases from $780, weekly; $3,380, monthly; and $40,560, annually).

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