Updated: Nov 11, 2022
What Does Being "Exempt" Mean In California?
There are two categories of workers in every workplace: excluded and non-exempt. Employees who are excluded from minimum wage and overtime pay provisions are known as the former. This is because excluded workers are paid on a salary rather than by the hour and serve in executive or technical positions. Year-end incentives are often given to exempt workers to compensate for the type of job they do and any extra work. A California Employment Attorney might be able to get you through the process of reclaiming your employment rights.
Most employers are required by California labor laws to obey such regulations, such as paying overtime, recording hours, and offering rest breaks. The statute, on the other hand, allows for several significant exceptions to these provisions. An employee who is excluded from one or more of these exceptions is known as an exempt employee in most situations.
To decide if a worker is covered by a wage and hour exemption under California law, there are typically three basic requirements:
For full-time jobs, the employee must be paid a salary that is at least double the state minimum wage.
Duties of a White Collar Employee.
Administrative, executive, or technical roles must be the employee's primary responsibilities.
The employee's job responsibilities must include independence and independent judgment.
If all three conditions are met, the employee will almost always be exempt from California's overtime, minimum wage, and rest break laws (but not meal break requirements). This exam, however, comes with many caveats.
Some workers are often subjected to a different set of requirements. Furthermore, certain workers are only covered by such wage and hour exceptions, which means they are shielded by certain labor laws but not others.
What Impact Do Exceptions to Wage and Hour Laws Have on Employees?
For any hour worked more than 40 during a workweek, federal law mandates employers to pay most workers an overtime rate of at least one-and-one-half times their normal hourly wage. Unless the employees are subject to an exception to California's wage and hour laws (in which case the two sets of laws are nearly equal), California law protects workers to a greater extent than federal law.
California's overtime laws mandate employers to pay one-and-a-half times their normal hourly rate of pay to workers who are not subject to wage and hour exceptions for:
In a single workday, all hours worked more than 8
In a single workweek, all hours worked more than 40
The employee worked the first eight hours on the seventh consecutive day of work in the workweek.
Employers in California are forced to pay workers who are not exempt from wage and hour laws double their normal hourly rate for All hours worked more than 12 in a single workday, and on the seventh consecutive day of work in the workweek, all hours worked more than 8.
Commissions on sales
Even if your boss refers to it as a bonus or anything else, any reward tied to your sales is a sales commission. The requirements for receiving the fee and the calculation formula must be written in commission plans. You are due a fee if you make a sale and fulfill all of the conditions of your commission contract. After the fact, the employer cannot adjust the schedule or argue that the commission plan is discretionary. You might be due any or all of your commissions for sales you made even though you left or are fired before the payout deadline. Furthermore, as previously mentioned, some inside salespeople are owed overtime, and the commission is factored into your overtime rate in such cases.
Employees that are tipped
Employees are entitled to their tips except for automatic gratuities on the bill that the client does not decide. As long as the tip pooling scheme is fair, an employer is entitled to pool tips and allocate them to all employees who delivered a service (in the case of restaurants, this includes cooks and dishwashers). Still, managers and owners are not allowed to take tips for themselves. Tips are not included in the minimum wage calculation.
Right to a Meal Break
If employees work more than 5 hours daily in California (including most workers subject to wage and hour exceptions), they are entitled to an unpaid 30-minute meal break. A second meal break is required if an employee works more than 10 hours a day.
Employees can agree (with their employers) to waive the first meal break if they work less than 6 hours a day. If they usually work less than 12 hours a day and the first meal break is not waived, they can both agree to waive the second meal break. The employee must be relieved of all responsibilities and be able to leave the workplace during the meal break. The employee must be charged for the meal break if he or she is expected to stay on the employer's premises or work site.
Employers must pay an additional one hour of pay at the employee's normal hourly rate if they fail to offer a meal break to their employees. For their employer's inability to provide them with missed meal breaks, the employee can only be paid an additional hour per workday.
Meal breaks may have certain exceptions, but the key exceptions mentioned in this article (those that apply to corporate, managerial, and technical employees) do not apply to meal breaks.
Right to a Rest Break
Employees in California that are not covered by wage and hour exceptions are often entitled to a paid 10-minute break in the middle of each 4-hour shift.
When an employee works less than 3.5 hours a day, they are not entitled to a rest day.
Employers are allowed to pay an additional one hour of pay at the employee's normal hourly rate if they fail to give a rest time to an employee. The employee can only be paid an additional hour per workday for their employer's inability to provide them with a missed rest time.
Their employers must give lactating mothers who wish to express breast milk for their children fair breaks. If a lactation break is taken during an employee's daily rest time, it must be compensated. They may not have to be compensated if they last longer than or in addition to the normal rest time.
Wage Statements and Meal and Rest Breaks
Non-exempt workers are entitled to a 30-minute unpaid meal break for every 5 hours worked and a 10-minute paid rest break for every four hours (or any fraction of time over two hours) worked. You can skip the meal break if you work less than six hours. Working more than six hours a day makes it very difficult for an employer to waive breaks. When your employer informs you that a break waiver is in effect, you can consult with a Los Angeles Employment Lawyer to determine if your rights are being violated.
Employers must provide compensation statements to non-exempt workers that accurately reflect the number of hours worked, salary rate, and subsequent pay. If your employer fails to provide you with a proper pay statement, it could mean you are not being paid properly, and you should seek legal advice.
Identifying whether an employee is entitled to a Wage and Hour Exception
To decide whether a worker is subject to one or more of these exceptions in California, there are normally three basic requirements:
For full-time jobs, the employee must be paid a salary that is at least double the state minimum wage.
Duties of a White Collar Employee.
Administrative, executive or technical roles must be the employee's primary responsibilities.
The employee's job responsibilities must include independence and independent judgment.
Several types of exceptions relate to particular jobs in addition to this three-part exam. Commissioned workers, Physicians and Surgeons, Computer Technicians, Private School Teachers, Outside Salespersons, Truck Drivers, and Union employees are among the most frequent job-specific exceptions.
These exceptions to the rule have their own examinations (distinct from the three-part test mentioned above). And some of them are only partially exempt from California's wage and hour laws.
Employers can only argue that an extraordinary situation occurs if an employee "plainly and unmistakably" fits the criteria for the exemption. If there is any ambiguity, the law usually allows the employee to be listed as a normal employee (one that is not subject to a wage and hour exception).
The Minimum Wage Requirement
Generally, if an employee is paid on a salary basis (rather than an hourly wage), the salary must be at least double the state minimum wage for full-time jobs to qualify for a wage and hour exception.
The Term "Salary"
For these reasons, a salary is an unchanging minimum wage. The employee's wages must be predetermined and cannot differ depending on the number of hours employed or the quality of the job done. According to the courts, employers can subtract from an employee's wages for full-day absences and still consider the employee to be compensated on a salary basis. But, if the employer deducts for partial-day absences, the employee is no longer deemed "salaried."
The employee will be classified as an hourly employee (and therefore not subject to these exceptions) if his or her salary depends on the number of hours worked with no minimum guarantee.
Making a Minimum Salary Calculation
As previously stated, California law mandates that a full-time employee be paid at least double the state minimum wage to be eligible for wage and hour exceptions. Full-time employment is defined as 40 hours a week for these purposes, and the employer's size currently determines the applicable minimum wage.
The applicable minimum wage must be multiplied by two and then multiplied by 40 hours a week to satisfy the minimum payment threshold for excluded workers. This means we'll be paid twice as much as the minimum wage per week.
Importantly, until 2023, California's minimum wage will rise every year on January 1st. As a result, the minimum wage for excluded workers in California will rise every year. Your California Employment Attorney will know how to thoroughly explain the calculation process.
Requirement for White Collar Duties
If the wage criteria are met, the next step is to determine if the employee is working in an administrative, executive, or technical capacity, also known as the "white-collar duties" test.
We look at the duties an employee actually performs—regardless of job title or how the job is described in a work description—to decide whether they are working in an administrative, executive, or professional capacity.
The white-collar duties test, for example, focuses on the employee's primary responsibilities. To pass this examination, an employee must devote more than half of his or her working hours to the primary responsibility.
Employees who pass this exam are eligible for wage and hour exceptions for a variety of rights, including:
The right to ten-minute rest periods, as well as overtime pay
The right to a minimum wage (as long as they meet the minimum salary requirement).
As a result, it's important to carefully assess whether an employee meets any of the test's criteria.
Employees who work in administration
If an employee's primary duty is office or nonmanual work directly related to management or general business activities, they are considered to be administrative.
When an employee assists in running a company, their work is related to management or general business operations. Since they do not help run the company, secretaries, store clerks, bookkeepers, and lead operators on production lines are not listed as administrative employees.
The Need for Discretion and Independent Judgment
According to the Labor Code, to qualify as an outstanding employee under California's wage and hour regulations, workers must routinely exercise discretion and impartial judgment in performing their duties. When an employee makes and executes critical decisions after weighing competing options, he or she is exercising discretion and impartial judgment.
Even if a higher-ranking employee has the right to override the decision, an employee's opinion is unbiased because it is free from immediate guidance or oversight.
Exceptions for Specific Jobs
A few other professions are subject to exceptions to some or all of California's labor laws, in addition to the primary exceptions mentioned above.
Employees who are paid on commission
In California, employees who are paid on a commission basis may be eligible for an overtime exception. The following conditions must be fulfilled to apply for this exception:
More than one-and-a-half times the minimum wage is earned by the employee. More than half of an employee's gross compensation comprises commission fees. They either work in the retail industry or in professional, technological, or clerical positions.
Commissions are wage fees that a salesperson is entitled to due to their efforts. The size of an employee's compensation in a commission-based contract is determined by the quantity or value of the item sold.
Particularly if it is calculated as a percentage of revenue or earnings, a discretionary payment that an employer may choose to pay or withhold, such as a performance bonus, is not a commission.
Surgeons and Physicians
California's overtime pay requirements are occasionally waived for licensed doctors and surgeons. To qualify for this exception, the physician or surgeon must pay a specific hourly rate. Perform activities that necessitate licensure as their primary responsibilities.
This exemption has a narrow scope of use. Interns and residents of medicine are not qualified. Physicians who are bound by those forms of collective bargaining arrangements don't either.
Professionals in Computer Science
Employees who work in the computer software industry are occasionally exempt from overtime pay. The following conditions must be fulfilled to apply for this exception:
The employee must spend most of his or her time doing analytical or artistic work.
The primary responsibilities of the employee would necessitate the use of discretion and impartial judgment.
A high level of expertise in computer systems analysis, programming, or software engineering is needed.
The employee's primary responsibilities must include designing or creating computer hardware or software.
Teachers in Private Schools
Under the professional exception mentioned above, many teachers are entitled to a wage and hour exemption. And if they don't meet the standards, certain private school teachers are eligible for a wage and hour exception. Instead, they would be considered acceptable if they meet the following criteria:
They work with children in kindergarten and grades 1 through 12.
They make at least twice the minimum wage in their state.
They have a baccalaureate (or higher) degree from an approved institution of higher learning or meet the criteria for a California or other state teaching certificate.
Salespeople who work outside the company
Employees who are classified as "outside salespersons" are normally exempt from wage and hour laws.
Someone who works as an outside salesperson is described as:
Who is over the age of 18?
Who spends more than half of their workday away from their employer's headquarters?
Who sells goods, services, contracts, or facility use?
Drivers of Commercial Vehicles
Some truck drivers are exempt from overtime rules in California (but not from other work rights such as meal breaks or the minimum wage). Interstate truck drivers and drivers transporting hazardous materials are exempt from this rule. In such cases, either federal laws or California's motor vehicle regulations govern the drivers' hours.
Employees in a Union
California's overtime rules do not always apply to union workers. Employees must be covered by a collective bargaining agreement specifying their salaries, work hours, and working conditions to apply for this exception. A premium wage scale for all overtime hours must also be included in the collective bargaining agreement, and a daily hourly rate of pay must be at least 30% higher than the state minimum wage.
Exceptions for specific jobs
California law is regulated in part by a set of legislation known as wage orders provided by California's Industrial Welfare Commission. In addition to the exceptions mentioned above, the wage orders have introduced numerous exceptions to California's overtime laws that apply to employees in particular sectors or occupations. Special overtime laws apply to the following occupations:
Employees who work in the home full-time
Counselors at the camp
Managers of nursing homes for the elderly
Some residential childcare services are open 24 hours a day, 7 days a week
Drivers and attendants of ambulances
Spouse, baby, and parents of the employer
The above-mentioned exceptions are interpreted broadly by California courts. The employee must follow the requirement for the exemption in a "clear and unmistakable" manner. Otherwise, the employee should be counted as exempt from wage and hour laws.
This principle heavily favors the employee, and the employer bears the legal burden of proving an exception. The effects of employers failing to treat their workers fairly as required by law may be serious.
Violations of the Labor Code in California will result in several penalties
Overtime that is not compensated
In California, normal (non-exceptional) workers have the right to overtime pay if they work more than eight hours a day, 40 hours a week, or seven days in a row. Employers also refuse to pay overtime compensation to misclassified workers as excepted.
Employees who have been denied overtime compensation due to a misclassification will file a claim for back pay for the unpaid overtime wages. Even for low-wage workers, these expenses can easily add up. Additionally, the employer could be liable for the employee's legal expenses and attorney fees incurred in seeking overtime pay.
In certain cases, a penalty per pay period for violating California's overtime laws can be imposed. The penalty is usually paid to the state of California, but under certain circumstances, the employee might be entitled to recover up to 25% of it.
Penalties for missing a rest period or a meal period
Employees who are not extraordinary are entitled to meal breaks and rest periods. Employers who misclassify their workers as exempt often refuse to provide the required breaks. An employee is entitled to one extra hour of pay at their normal hourly rate if they skip a mealtime or rest break.
If an employee misses several rest breaks or mealtimes, they will receive up to one hour extra per workday for each missed rest period and one hour extra per workday for each missed meal break. Thus, an employee who works a twelve-hour shift without rest or meal breaks is entitled to two additional hours of pay at his or her normal hourly rate.
Penalties for Paystubs
If the employer fails to maintain accurate records of the employee's employment, the employer will be required to pay a penalty pay stub penalty to the employee. The penalty amount is determined by the number of paydays over which the breach occurred.
This penalty is often imposed when employees are unsure how much back pay they might be owed because their employer listed them as exempt from one or more of California's labor laws by mistake.
Penalties for Waiting Time
The court may impose a waiting time penalty on an employer who intentionally fails to pay an employee's wages on time, as the Labor Code requires. If employees have been denied their full wages due to being misclassified under a wage and hour exemption in California, they may be entitled to compensation.
In particular, a late payment will result in a penalty of up to 30 days' salary for the employee. Unpaid salaries accumulate regularly, not just on days when the employee worked—but even on days when the employee did not work.
If You've Been Misclassified, Here's What You Can Do.
Employees that have been incorrectly identified as a result of one of the exceptions mentioned above have three options: Informally resolve their disagreement with their boss, file a complaint in court, or file a pay claim with the Division of Labor Standards Enforcement (the "DLSE") in California.
The employee's circumstances would determine the best way to settle an exemption conflict. Before determining how to proceed, it's normally a good idea to seek legal advice. However, employees should be aware that specific deadlines must be met to file a compensation claim or lawsuit.
Claim Submission Deadlines
Under California law, employees typically have three years to file a wage lawsuit. The clock starts ticking when the salaries are first legally due. Wages are usually due on the daily payday following the pay period in which the employee worked.
When the job is ongoing, and the employee is paid regularly (e.g., weekly or monthly), a new cause of action arises on each payday, causing the start of a new statute of limitations.
Exceptions to the rule
Certain forms of lawsuits can have a shorter deadline for employees who want to pursue them. A petition for violation of an oral contract must be made within two years of the date of the breach.
A petition for statutory damages can have a short deadline as well. Although the legislation is unclear, certain fines for late wage payments could be subject to a one-year statute of limitations. Other fines, on the other hand, include a three-year statute of limitations.
You and your Los Angeles Employment Lawyer can often pursue a petition for unpaid salaries (but not penalties) up to four years after the claim begins to accrue. The employee must file a lawsuit based on violating a contractual contract to benefit from the longer statute of limitations.
Alternatively, the employee could use California's Unfair Competition Law to argue that the failure to pay their salaries was an illegal business practice. An employee can be able to access a four-year statute of limitations in this way, but the remedies are always restricted.
Cases in Federal Court
Back pay for overtime compensation accrued in the two years before filing a wage claim is normally available. If the misclassification was willful, federal law extends the time limit to three years.
The Fair Labor Standards Act, Exempt Employees, and Nonexempt Employees
The FLSA, which was enacted in 1938, established the exempt employee category. The landmark labor legislation protects staff from unfair wage practices and job rules. While the legislation has changed significantly over the last 80 years, it remains one of the most relevant labor laws in American history, establishing rules on a wide range of employee and employer-related issues.
The FLSA lays out the circumstances under which workers are expected to be paid and when they are not expected to be paid. Exempt employees, for example, do not earn overtime or time and a half when they work more than 40 hours in a week. Time and a half is 1.5 times the employee's hourly wage, and it is the bare minimum that an employer would pay for overtime. Overtime is described as any hours worked more than 40 in a seven-day workweek.
Exempt Employee Benefits and Drawbacks
The benefits of becoming an exempt employee begin with the assurance of a consistent paycheck. Exempt workers also receive more than hourly employees and have access to benefits such as retirement savings (IRAs), 401(k) plans, pensions, incentives, employer-sponsored healthcare plans, and paid holiday and sick days.
The disadvantage is that you are not qualified for overtime. Depending on your employer's attitude, you can find yourself working long hours to complete an overburdened job portfolio with no recourse for extra compensation or relief from the stress caused by the long hours. In other words, you're at the whim of your boss.
What Is Misclassification of Employees?
Employee misclassification is a popular type of discrimination in the workplace. Some employers find it a habit to misclassify non-exempt workers as exempt to avoid paying overtime. Misclassifying workers as contractors or daily employees as "managers" is another example.
Although the distinction between exempt and non-exempt employees can be complicated, one simple way to explain the difference is to consider the degree of power the employer has over the employee.
In simple terms, you can be a non-exempt employee if your boss can tell you what to wear, when to come to work, and when to take breaks. In contrast to an independent contractor, whose relationship with the employer is more like a collaboration than a boss-employee relationship, a non-exempt employee is often entitled to overtime pay if you work overtime hours.
Is it necessary for me to file a lawsuit?
It may be difficult to know if you can take further action if you believe you have been discriminated against because of deliberate employee misclassification. The response depends on several variables, and it is best to consult with a California Employment Attorney before making a decision.
Who is excluded and who is not being governed by very clear rules. Depending on the group in which your job role falls, these guidelines may vary significantly. The interpretation of these guidelines can have an impact on the validity of your employee misclassification argument.
In addition, the length of your job, the disparity between what you were paid and what you should have been paid, and the expense of filing a case must all be considered. In today's economy, it's not unusual for businesses to lay off employees to meet Wall Street analysts' earnings goals. Exempt staff could be required to perform non-exempt duties that laid-off workers previously did as part of the procedure.
Furthermore, a job that once encouraged innovation and imagination can become overly structured and rigid. Employees can need to be reclassified in this situation. Our prescreened Employment Lawyers in Los Angeles will examine the details of a job and see whether a valid wage and hour classification issue needs to be resolved under the FLSA or California overtime laws.
Class Action Lawsuits
When a large number of workers' rights are violated, they will be able to file a class-action lawsuit to bring their cases together. It's difficult to sue your current boss, and a class action has a lot of benefits, including the power of numbers. It's difficult for an employer to fire or retaliate against a group of claims with a high value. A California Employment Attorney can also be capable of handling this case.
Find An Employment Lawyer in Los Angeles (And All Over California!)
Has your employer been violating California Labor Laws? Have you or your co-workers experienced material and immaterial losses due to t the violations? 1000Attorneys.com is a California Bar Association Certified Lawyer Referral Service that can refer you to a California Employment Attorney best fit to handle your case.
Contact us through our 24/7 Live Chat (or complete our submission form) for a free initial case review.