The duties cannot rescue a salary below the floor
The salary requirement is conjunctive with the duties requirements, which means it is independent of them: satisfying one does not satisfy the other, and failing either defeats the exemption. A manager who performs flawlessly exempt work but is paid below the salary floor is non-exempt, and no quality or quantity of managerial duties cures the shortfall. This makes the salary prong the cleanest defense to test and the cleanest claim to lose — it is a number, checked against a threshold, with no room for the factual contest that the duties analysis invites. For the employer, it is the element that should never fail, because it is the one entirely within the employer's control and entirely free of interpretive risk; for the plaintiff, a salary below the floor is a misclassification that needs no time study to prove.
Because it is mechanical, the salary prong also produces the most avoidable misclassifications. The floor rises every January with the state minimum wage, and a salary set high enough in one year silently falls below the floor in the next unless it is raised — so an employer that classified a manager correctly when hired can hold that manager misclassified two years later without any change in duties or any decision to misclassify, simply by leaving the salary unadjusted. The sections that follow set the current threshold, the higher fast-food floor, the salary-basis rules that can defeat the exemption independently, and the way the back overtime is computed when the exemption fails.
Twice the minimum wage, indexed annually
The threshold is defined by formula, not by a fixed dollar figure: the exempt salary must equal at least twice the state minimum wage for full-time employment, which section 515(c) sets at forty hours per week. For 2026, with the state minimum wage at $16.90 per hour, the floor is $70,304 per year — that is two times $16.90, times forty hours, times fifty-two weeks, or $1,352 per week and roughly $5,858.67 per month. The figure was $68,640 in 2025 and will be higher again in 2027, because it tracks the minimum wage, which is itself indexed. The salary must be a guaranteed, predetermined amount; commissions, tips, and discretionary bonuses do not count toward it, so a manager whose cash compensation reaches the floor only with variable pay does not satisfy the requirement on salary alone.
The floor is not a number to set once. It is a moving line, and a frozen salary walks beneath it every January.
The floor is $83,200 — twice the fast-food minimum wage
For covered fast-food employers the floor is higher, and the reason is statutory rather than merely cautious. AB 1228 set a sector minimum wage of $20 per hour for covered fast-food restaurants — in force since April 2024 and unchanged for 2025 and 2026 — and it did something more: it provided that this rate “shall constitute the state minimum wage for fast food restaurant employees for all purposes under [the Labor Code] and the wage orders.” Because section 515 pegs the exempt floor to twice the state minimum wage, and AB 1228 makes the $20 rate the state minimum wage for these employees for all purposes, the exempt floor for a covered fast-food manager is two times $20, times forty, times fifty-two — $83,200. The Division of Labor Standards Enforcement has taken precisely that position in its AB 1228 guidance, stating that a covered fast-food employee paid less than $83,200 is not exempt. The contrary reading — that section 515's reference to the “state minimum wage” confines the floor to the $70,304 statewide figure — must overcome AB 1228's express “for all purposes” command and the agency's stated view, and is not the better one.
The one genuinely open point is narrow. No published appellate decision has yet applied the deeming language to the exempt floor, so the $83,200 figure rests on the statute's express “for all purposes” command and the enforcing agency's position rather than on case authority — but that is a thin reed for a contrary bet, not a live alternative. The practical conclusion is straightforward: treat $83,200 as the operative floor for covered fast-food managers and pay it. The downside of underpaying is the entire derivative cascade if — as the statute and the DIR both indicate — the higher figure governs; the cost of meeting it is small. An employer may note the $70,304 argument for whatever it is worth, but should not set compensation in reliance on a reading that AB 1228's text and the agency's guidance both contradict.
Clearing the floor is not enough — the pay must be a true salary
The amount is one requirement; the manner of payment is another. To be exempt, the employee must be paid on a salary basis — a predetermined amount that constitutes all or part of the compensation and that is not subject to reduction based on the quality or quantity of the work performed. The point of the requirement is that a true salary does not vary with hours or output; an exempt employee earns the full salary in any week in which work is performed, regardless of how much. Improper deductions undermine that premise and can defeat the salaried status entirely, retroactively converting the position to non-exempt — for example, docking pay for partial-day absences, or reducing the salary for slow business, treats the pay as something other than a guaranteed salary and can forfeit the exemption the duties would otherwise support.
This is a distinct and easily overlooked way to lose the exemption, and it is independent of both the duties and the threshold. An employer can have a genuinely managerial role, a salary well above the floor, and still lose the exemption because a payroll practice docked the salary improperly. The permissible-deduction rules are technical and should be reviewed specifically rather than assumed; the operational discipline is to ensure that exempt managers' pay is administered as a true fixed salary, with deductions limited to those the rules allow, so that a payroll convenience does not forfeit an otherwise valid exemption.
When the exemption fails, the salary is divided by forty
If the exemption fails — on the duties, the threshold, or the salary basis — the employee was non-exempt and is owed overtime, and section 515(d) fixes how that overtime is computed. Under section 515(d)(1), the regular hourly rate of a nonexempt full-time salaried employee is one-fortieth of the weekly salary: the salary is divided by forty, not by the actual number of hours worked. That divisor matters enormously. A federal employer might argue the "fluctuating workweek" method — dividing the salary by all hours worked to derive a lower regular rate, then paying only a half-time premium on the overtime — but California does not permit it. Section 515(d)(2), added by AB 2103 in 2013, provides that a fixed salary compensates only the regular, nonovertime hours, notwithstanding any private agreement to the contrary, expressly overturning the Arechiga decision that had allowed an employer to "back out" overtime from a salary by mutual agreement.
The combined effect is that the back overtime on a reclassification is larger in California than the fluctuating-workweek method would produce, and the larger figure is not negotiable. The regular rate is the salary over forty; the overtime rate is one and one-half times that; and the unpaid overtime accrues at that rate for every hour over eight in a day or forty in a week, across the limitations period. No agreement, however explicit, allows the employer to treat the salary as having already covered the overtime or to compute the rate on a fluctuating basis. This is the engine of the back-overtime exposure, and the calculator below shows both the correct computation and the impermissible alternative it displaces.
The threshold, and the divide-by-40 overtime
The first panel checks a salary against the applicable floor; the second computes the back overtime under section 515(d) and shows the impermissible fluctuating-workweek figure beside it. Both are teaching tools that apply only the salary prong — clearing the floor does not establish the exemption, which still requires the duties.
Fig. 1. Illustrative. Lab. Code § 515(a), (c), (d). The threshold checker applies only the salary prong; the exemption also requires the duties (01–03). The overtime panel shows the § 515(d) divide-by-40 computation and, for contrast, the fluctuating-workweek figure that AB 2103 forecloses. Daily overtime and double-time are not modeled; figures are hypothetical.