If you’re a salaried store manager, administrative assistant, or other “white collar” employee, chances are your employer doesn’t pay you overtime—no matter how many hours you work in a given week. But new federal rules that take effect this December will force employers to start paying overtime to millions more salaried white collar workers. Will you be one of them?

Federal law requires that most employees get paid at time-and-a-half if they work more than 40 hours in a given week. And contrary to what employers may say, this includes salaried employees. However, certain salaried white collar employees—those whose job duties fit the federal definitions of “executive,” “administrative,” “professional,” “computer,” or “outside sales” employees—are exempt from having to be paid overtime if their salaries exceed a specified minimum exemption amount.

For executive, administrative, and professional employees, that salary level is a mere $455 per week, or $23,660 per year. So an employer must provide overtime pay to a salaried secretary or store manager who earns $23,659 per year, but not one with the same job duties who earns $23,661—just $2 more.

Employers have long taken advantage of this low exemption amount to get millions of hours of free labor out of employees by simply putting them on salary and, often, “promoting” them to a position with “manager” in the title.

But new federal overtime regulations that take effect December 1, 2016 will change that by more than doubling the overtime exemption threshold for executive, administrative, and professional employees to $913 per week, or $47,476 per year. This simple change will make more than 4.2 million new employees eligible for overtime in the policy’s first year alone.

Nearly 400,000 of these newly eligible employees will be in California—more than in any other state.

Moreover, the exemption amount will now automatically increase every three years to keep up with inflation—a commonsense policy that wasn’t adopted when the exemption amount was last updated in 2004. Since then, inflation has steadily eroded the value of every dollar an employee earns. For example, an item purchased for $23,660 in 2004 would cost over $30,000 today due to inflation. 

So the new overtime exemption threshold of $913 per week or $47,476 annually does more than just catch up with inflation: It represents a long-overdue increase in the standard of living for millions of white collar workers whose employers have gotten away with not paying them for overtime for far too long.

“This change is long overdue,” says wage and hour attorney Eric Grover of Keller Grover LLP. “The increase to the weekly rate will provide hundreds of thousands of hard-working California men and women a fairer wage for the work they perform.”

More than 77 million workers in the United States aged 16 or older were paid hourly wages in 2014, according to the U.S. Bureau of Labor Statistics. Those 77 million-plus workers make up more than 58 percent of the American work force. In California, more than 9 million workers were paid hourly wages in 2014, representing more than 60 percent of all workers in the state.

As of January 1, 2016, California’s minimum wage is $10.00 per hour. The federal minimum wage is, by contrast, is only $7.25 per hour. In fact, the federal minimum wage rate is so low, 27 other states, plus the District of Columbia, have joined California in raising the minimum wage above the federal level. In 2015, only Connecticut, Oregon, Vermont, Washington, and the District of Columbia have higher minimum wages than California.

But that’s just the state minimum. California hourly employees who work in many of the state’s largest cities benefit from even higher minimum wages. Hourly workers in San Diego must be paid at least $9.50 per hour. That figure will increase to $10.50 per hour on January 1, 2016 and to $11.50 per hour on January 1, 2017. In San Francisco, hourly workers are guaranteed a minimum wage of $12.25 per hour. On July 1, 2016, the minimum hourly wage in San Francisco will jump to $13.00, increase again to $14.00 on July 1, 2017, and reach $15.00 on July 1, 2018. In San Jose, hourly workers must be paid $10.30 per hour; that rate is reviewed annually for increases based on changes to Consumer Price Index.

Both the city and county of Los Angeles recently passed laws to raise the minimum wage in those locals to $15.00 by 2020. (Los Angeles county’s ordinance covers those areas in the country that are not incorporated in other cities.) The increase will happen gradually, like it has in many other cities, to $12.00 per hour on July 1,  2017, $13.25 on July 1, 2018, and $14.25 on July 1, 2019.

Even medium-sized California cities have taken steps to protect hourly workers, particularly in the San Francisco Bay Area. Oakland raised it’s minimum wage to $12.25 this year, and that wage will increase yearly along with the Consumer Price Index. Sunnyvale and Mountain View upped their minimum wage to $10.30 per hour and will also follow the CPI for yearly increases. Berkeley’s minimum wage goes up to $11.00 per hour on October 1, 2015, and rises again a year later to $12.53.

Hourly workers can most often be found in lower-paying jobs, like food preparation and service, retail sales, janitorial services, transportation and moving, construction, and health care support. If you are paid by the hour, make sure you know what the minimum wage is in your city and state.

California protects employee working conditions in the state through a broad set of laws, rules and regulations. California employers must pay their employees a minimum hourly wage and one-and-a-half times the minimum wage for overtime work of more than 8 hours in a day or more than 40 hours in a workweek.

Certain exceptions apply to California’s overtime pay rules, however. One important exception is for employees who are paid a commission. This exception is spelled out in two different wage orders issued by the Industrial Welfare Commission. Wage Order No. 4 (which applies to professional, technical and officer employees in certain industries) and Wage Order No. 7 (which applies to retail employees) exempt commissioned employees from the overtime rules when two conditions are met:

1. an employee’s earnings must exceed one-and-a-half times the minimum wage; and
2. more than half of the employee’s earnings must come from commissions.

The California Supreme Court recently issued a decision interpreting this exception in a limited fashion favorable to employees. In Peabody v. Time Warner Cable, Inc., Peabody filed a class action lawsuit against Time Warner claiming violations of California’s overtime pay law. Peabody had been employed by Time Warner as an account executive and was responsible for selling advertising time on Time Warner’s cable channels. She and the other account executives were paid a base salary of $20,000 per year, plus commissions on advertising time sold. Under Time Warner’s policy, commissions were earned only after (1) the customer ordered the advertisement to run on one of Time Warner’s cable channels; (2) the advertisement ran; and (3) the customer paid for the advertisement.

For a 40-hour work week, the $20,000 base pay resulted in an hourly wage of $9.61 and bi-weekly pay of $769.23. Peabody claimed, and Time Warner did not dispute, that in most weeks, she worked 45 or more hours, but was not paid overtime. Time Warner claimed that Peabody and the other account executives were exempt from overtime under the commissioned-employee exemption.

The dispute turned on the method used by Time Warner to calculate and pay commissions. For example, when an account executive earned commissions in October, Time Warner would pay those commissions in one of the two semi-monthly paychecks in November. As a result, for many weeks in which Peabody worked overtime, she still received only her bi-weekly base pay of $769.23.

Time Warner argued that it should be allowed to “apportion” some of Peabody’s commissions over the month in which the commissions were earned, so that for the month, her pay exceeded $12 per hour, or one-and-a-half times the minimum wage.

The Court rejected Time Warner’s argument, on several grounds. First, the Court held that if an employee earns commissions over the course of a month, she must be paid those commissions in the pay period they were earned. California mandates at least two pay periods each month. Thus, Time Warner’s practice of paying earned commissions the following month, and in only one of the two required semi-monthly paychecks, violated California law.

Second, the Court ruled that the commission exception to California’s overtime law only applied when an employee’s earnings in each pay period exceed one-and-a-half times the minimum wage. “An employer may not attribute wages paid in one pay period to a prior pay period to cure a shortfall,” wrote the Court. Indeed, the Court adopted the position urged by California’s Labor Commissioner that, for the commission exemption to apply, the employee must be paid at least one-and-a-half times the minimum wage for each work week.

The Court also noted that Time Warner’s practice didn’t comply with California’s pay-stub rules, which require employers to provide pay stubs that list the gross and net wages earned in the applicable pay period.

If you are paid fully or partially on commission, read your pay stubs carefully to ensure that you are receiving your commissions in the pay period in which they are earned. If you work more than 8 hours per day or 40 hours per week, you have the right to overtime pay unless the commission-employee exemption — as interpreted by the California Supreme Court — applies.

With some limited exceptions, California employees are now entitled to accrue and take paid sick leave. California is the second state in the nation to mandate paid sick leave for its employees; Connecticut was the first. But unlike in Connecticut, California’s new paid sick leave law applies to employers of every size.

Here’s how California’s new paid sick leave law works:

To accrue paid sick leave with a particular employer, an employee must work for at least 30 days in a twelve-month period for that employer. The employee accrues at least one hour of paid sick for every 30 hours worked for that employer. An employee may not take paid sick leave, however, until she has worked for that employer for at least 90 days.

The new sick leave law applies to full-time, part-time, per diem and temporary employees in California, with limited exceptions. Providers of publicly-funded In-Home Supportive Services are exempt, as are employees covered by collective bargaining agreements. Airline employees on the flight deck in the cabin crew are also exempt from the new law as long as they are compensated in an equal amount by an airline policy.

Most full-time employees will accrue a bit more than 64 hours of paid sick leave in a year, but employers may cap the amount of paid leave employees can take in a year at 24 hours. A “year” can be defined by the employer as either (1) a year of employment; (2) a calendar year; or (3) a twelve-month period. Employees may “roll over” their accrued paid sick leave from one year to the next, but an employer may limit the total amount of paid sick leave the employee has “in the bank” to 48 hours.

If an employee works for a particular employer fewer than 90 days in a year — i.e. a seasonal employee — and returns to that same employer within the next twelve months, the paid sick leave the employee had accrued the prior year will be reinstated, if the accrued time was not paid out the employee when she left.  If the employee returns to the employer more than twelve months later, she must start accruing paid sick leave as if she were a new employee.

The new law sets minimum standards for California employers. Many California employers provide more flexible paid time off policies that can be used for sick leave, vacation or personal time. As long as these policies result in at least 24 hours of total paid sick leave in a year, they comply with the law.

An employee may use paid sick leave for preventative care or actual sickness, for themselves or a family member — a spouse, registered domestic partner, child, parent, grandparent or sibling. An employee may take less than a full day off; this is particularly handy when an employee sees a doctor for an annual physical. But the employee can require the employee to use at least two hours of paid sick leave at a time.

An employer may use one of two methods to calculate how much to pay an employee when she takes paid sick leave: (1) the employee’s regular rate of pay for the week in which she took the leave; or (2) total wages (excluding overtime) divided by the employee’s total hours work in full pay periods over the prior 90 days.

California protects working conditions for employees in the state through a broad set of laws, rules and regulations. For example, California employers must pay their employees a minimum hourly wage (now at $9.00 per hour) and, generally speaking, one-and-a-half times the minimum wage for overtime work of more than 8 hours in a day or more than 40 hours in a workweek. There are exceptions for professional, managerial or technical employees who are exempt from the minimum wage laws. Employers in California must also reimburse employees for expenses incurred in performing their job.

Not all workers are considered employees under California law, however. Some people who provide services to others are independent contractors. And figuring out who are employees and who are independent contractors is no easy task.

California’s Labor Code creates a presumption that anyone who provides a service to another is an employee. But that presumption can be overcome based on the specific details of a particular working relationship. Neither the Labor Code nor any other California statute sets forth a test to determine if someone is an employee or an independent contractor. Instead, the law has been developed through litigation, as workers brought cases to court claiming to be employees and deserving of the benefits that come along with employment. 

The key case is S.G. Borelli & Sons v. Department of Industrial Relations, a California Supreme Court decision from 1989. In that case, the Court ruled that the company has the burden to prove a worker is not an employee. To resolve that dispute, the most important factors are whether the company has the right to control both the worker and the method and means by which the worker performs the required services. Secondary factors to be considered include whether the worker performs services distinct from the employer’s main business; whether the worker requires close supervision; whether the worker invests in and supplies the necessary tools and equipment; whether the worker has the opportunity for profit; how the worker is paid; and what the expectations of each side were at the beginning of the relationship.

Note that there is a case currently pending before the California Supreme Court that may change the legal test for determining whether a worker is an employee or an independent contractor. In Dynamex Operations West v. Superior Court, the California Supreme Court will decide whether the common-law test laid out in S.G. Borelli & Sons still applies when the California’s Industrial Welfare Commission has issued a Wage Order that specifically defines who is an employee under certain circumstances.

The IWC has issued 17 Wage Orders. Twelve orders govern particular industries like manufacturing, transportation and the movie industry. The other five orders govern particular kinds of employees who do not work in one of the 12 specifically-covered industries. Dynamex Operations involves the transportation industry, which is governed by Wage Order No. 9. That order defines an employee as “a person employed by an employer” and defines employer as “any person who directly or indirectly, through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person.” 

You can see how that definition differs from the one described in the S.G. Borelli & Sons case. The California Supreme Court will consider these issues and will likely issue a decision sometime in 2016.

One last note. California wage and hour protections are considered more protective of employees than the Federal Labor Standards Act or FLSA. For example, the federal minimum wage is only $7.25 per hour. Nevertheless, the FLSA takes a broader view of who is an employee, as compared to independent contractors. Under the FLSA, an employer is one who “suffers or permits” another to work for him. When Congress enacted the FLSA, the “control test” discussed in S.G. Borelli & Sons had been in use by courts. Congress intended to sweep more workers into the classification of employee, and thus created the “suffer or permit” to work test.

The U.S. Department of Labor, the federal agency that administers the FLSA, uses the “economic reality” test flesh out the “suffer or permit” to work standard. Under the economic reality test several factors are considered equally, and seek to get to the question of whether the worker is economically dependent on the company. If so, the worker will be considered an employee.

If you are being treated as an independent contractor, consider whether you should be considered an employee under either California or federal law. We can help you work through those issues.