Exempt employees usually hold administrative, professional, or executive positions. They’re “exempt” from overtime regulations under the Fair Labor Standards Act (FLSA) and California law, so they are not entitled to overtime pay. Non-exempt employees are typically paid hourly and perform more manual or technical duties.
What is the Difference Between Exempt & Non-Exempt?
The main difference between an exempt and non-exempt worker is whether they qualify for overtime pay. Exempt employees are not eligible for overtime, whereas non-exempt employees do get paid overtime.
What determines who is classified as exempt or non-exempt comes down to how much money they earn, the nature of their work, and their job duties. We explore more in our blog below.
Who Is Considered an Exempt Employee?
An exempt employee is a type of employee who is exempt from many of California’s pro-worker laws, including the right to a minimum wage, the right to overtime pay, and the right to paid rest periods and unpaid meal breaks. If you’re an exempt employee, your employer can require you to work more than eight hours a day or more than five days a week without paying you a single extra cent or giving you any breaks.
Exempt employees include the following types of employees:
- Independent contractors,
- Salaried employees,
- Certain ride-share employees, and
- Outside salespersons.
Luckily, these exemptions are narrowly interpreted and often have strict requirements. Many employers incorrectly classify their employees as exempt.
What Do I Do If I Am Improperly Classified as Exempt?
If you are improperly classified as exempt, you are entitled to significant potential damages, including unpaid minimum wages and overtime wages, meal and rest period premium payments, and other civil penalties. Talk to one of our attorneys for help in pursuing your claim.
How Do I Know If I’m Being Misclassified as an Exempt Employee?
In California, “salaried” employees are often classified as exempt, meaning they are not paid a minimum wage for all hours worked, do not earn overtime pay, and are not guaranteed meal and rest periods. But simply being on a “salary” is not enough to be properly exempt under the law—and employers frequently misclassify employees by failing to comply with the two-part test for the salary exemption: (1) receiving the minimum salary, and (2) performing exempt duties.
What is the Minimum Salary for Exempt Employees?
So, when is a salaried employee exempt vs. non-exempt from overtime wages? In all cases, to qualify for the salary exemption, an employee must be paid a “monthly salary equivalent to no less than two times the state minimum wage for full-time employment.” Lab. Code § 515(a). This equates to roughly $64,480 per year in 2023.
In addition to the amount of salary, the salary must be paid as a true salary and not as a disguised hourly rate. That is, an employee must be paid their daily salary amount regardless of the number of hours worked in a given shift, and no deductions can be made for partial absences. Additionally, you must be put to work at least 40 hours per week, so you cannot be a part-time exempt employee.
If your employer is not paying you at least twice the applicable wage, is not paying you the same salary regardless of the hours worked per shift, or is only giving you part-time hours, you cannot be classified as a non-exempt, salaried employee, and your employer likely owes you back wages.
How Do I Determine Who Qualifies As Exempt or Non-Exempt?
To qualify for the salaried employee exemption, you must also spend more than 50% of your time on “exempt duties” that “customarily and regularly exercise discretion and independent judgment in performing those duties.” Lab. Code § 515(e).
While an exact definition of each type of exempt duty requires a legal analysis of the specifics of your job, a general rule of thumb is that this part of the test basically asks what types of work a salaried exempt employee does and how often he or she does those tasks.
- Does the employee perform managerial or professional work requiring judgment? If the employee is often engaged in managerial work or other professional work and that work requires them to apply their own judgment and experiences to the work, they are likely to meet the exemption.
- Does the employee perform repetitive tasks? Where the employee simply takes direction and engages in clerical or other rote work, they are likely to fail the exemption test.
An employee’s title or job description is not determinative- Rather, what matters for the exemption is the kind of work actually performed by the employee and the realistic requirements of their job.
MISCONCEPTIONS ABOUT SALARY EXEMPTIONS
Do not let your boss use your rate of pay as the only reason for denying you certain rights under state or federal labor laws. Your salary is not the only determining factor in the definition of an exempt and nonexempt employee, and some professions have stricter exemption rules than others.
While the general standard for exempting an employee from the right to receive overtime pay and meal breaks is that they make at least twice the amount of the state minimum wage for full-time work, earning this amount is not enough to exempt all employees. Before they are deemed exempt, some employees must make more than twice the state minimum wage or fulfill different standards. Let’s look at who those employees are.
SALARY AND DUTY REQUIREMENTS FOR EXEMPT COMPUTER SOFTWARE EMPLOYEES
If you perform skilled work in computer programming, computer systems analysis, or software engineering, you are exempt only if you make at least $36.00 per hour or $75,000 per year. Also, to be exempt, the nature of your position must include the following:
- Work that is primarily creative or intellectual and requires your independent judgment;
- Work duties that include systems analysis, documentation, design, development, creation, or modification; and
- Work that requires you to be highly skilled and proficient in the application of highly specialized information for programming, analysis, or engineering.
Like any other exemption test, your job title does not determine whether you are exempt as a computer software employee. The state looks at your specific duties and your wages. Also, computer software employees who are trainees or have not reached the skill level required to work independently are not exempt from overtime and break laws.
SALARY AND DUTY REQUIREMENTS FOR LICENSED PHYSICIANS
Licensed physicians whose primary work requires licensure must make significantly more than twice the minimum wage rate to be exempt. To be exempt, a licensed physician cannot be a resident or intern, and they must earn at least $55.00 per hour. This minimum rate of pay is also subject to change every October 1, so if you are a physician, you may need to consult with an attorney from time to time to make sure your employer is properly and regularly complying with all wage and hour laws applicable to you.
YOUR EXEMPTION MIGHT HAVE LESS TO DO WITH YOUR JOB DUTIES AND MORE TO DO WITH YOUR RELATIONSHIP WITH YOUR EMPLOYER
Many overtime exemptions depend on the nature of your job, but California law also exempts employees of certain family members. If you are one of the following, you’re likely not entitled to overtime pay:
- The employer’s spouse,
- The employer’s child (biological or adopted), or
- The employer’s parent.
If you are related to your employer but don’t have one of the family ties mentioned above, you might have the right to ask for unpaid overtime wages. Requesting proper payment from a family member is rarely easy, but we can help you take the right steps to recover the wages you have earned while keeping your family bond respectful and strong.
PTO FOR EXEMPT VS. NON-EXEMPT EMPLOYEES
Whether you have access to overtime wages can mean a lot for your bank account, but your right to use paid time off (PTO) can mean a lot for your quality of life. And exempt and non-exempt employees might receive different benefits under California’s PTO laws.
The State of California does require employers to provide PTO for vacation time, but employers must provide each employee with at least three days or 24 hours of paid sick leave to address their own health needs or the healthcare needs of their family. The payment that an employee receives during their sick leave depends on their exempt or non-exempt status. The following pay rates apply for paid sick leave:
- For nonexempt employees — the pay rate is based on the employee’s regular pay rate for the workweek in which they claim paid sick leave or the employee’s average wages for their full pay periods over the preceding 90 days (not including overtime).
- For exempt employees — the pay rate is based on the employee’s regular pay rate.
If you need to use paid sick leave as an exempt employee, calculating the compensation you will receive for your time off will likely be easier to predict.
EXAMPLES OF OVERTIME LAW VIOLATIONS AND PENALTIES
If an employer violates state or federal wage laws by claiming an employee is exempt, that employer could be on the hook for serious penalties.
CALLING EMPLOYEES INDEPENDENT CONTRACTORS
One way many employers try to duck their responsibilities is by claiming their employees are independent contractors. And hiding behind the “independent contractor” label can run rampant in the staffing world. For example, a medical staffing agency in Virginia was ordered to pay $7.2 million in liquidated damages and back wages after claiming over 1,000 of its healthcare professionals were independent contractors and denying them overtime premiums in violation of federal law. If you get jobs through a staffing agency, check whether you are receiving overtime and proper breaks. While you might be an independent contractor for the business that uses your agency’s services, you’re likely a full-blown employee of the agency, and your checks should reflect that.
GIVING EMPLOYEES FALSE TITLES
An employer might think that calling its employee an “executive staff member” is enough to evade overtime pay obligations. As we mentioned above, a job title means nothing under state and federal wage and hour laws if an employee is not tasked with skilled work or is not allowed to use their independent judgment on the job. For example, an employer might call the employee who works with the CEO an executive. But if that employee’s main job is taking dictation and assisting the CEO and the employee has no discretion regarding when and how they perform the duties of their job, that employee is likely not exempt.
An employer that fails to timely pay overtime to an employee with an empty “exempt” title could be subject to serious fines. Not only must an employer pay back wages for its outstanding overtime obligations, but an employer might also be ordered to pay $100 for an initial violation and $200 plus 25% of the owed wages for each subsequent violation.
BEST EMPLOYER PRACTICES FOR AVOIDING EMPLOYEE MISCLASSIFICATION
If you are an employer worried about misclassifying employees, your first move should be to speak to a knowledgeable attorney about your obligations in light of the circumstances of your business or work. An attorney can help you set up management and payroll models to keep you out of trouble with the state or federal government. You should also have clear job descriptions for each employee that reflect the work that each employee does. And you should regularly audit your payroll and attendance records to make sure that all overtime payments are made on time or as soon as possible. Remember that the government presumes that an employee is non-exempt unless you have solid proof otherwise, so don’t try to play around with tenuous arguments about your employee’s status when you get ready to pay them.
Talk to an Experienced Minimum Wage and Employment Lawyer
At King & Siegel LLP, we have helped hundreds of workers hold employers accountable through legal actions. If you have been discriminated against, retaliated against, denied your rightful wages, or wrongfully terminated, our attorneys are here to help.
Need legal help? We provide free, confidential consultations to California workers. You should contact us as soon as possible to make sure your claim is still within the time limits set by law. If you are a victim of wage theft or other violations of the employment laws, contact us today through our website, or give us a call at 213-465-4802 to schedule a free consultation.
Julian Burns King graduated with honors from Harvard Law School and founded King & Siegel in 2018. As head of the Firm’s discrimination and harassment practice areas, she champions the rights of working parents and victims of workplace discrimination and harassment. She has been recognized as a “Rising Star” by Super Lawyers annually since 2018 and has recovered tens of millions of dollars on behalf of her clients.