Recent multimillion-dollar settlements of overtime claims emphasize how important it is for California employers to understand how to classify and pay employees for their work. Recently Pacific Bell settled for $35 million, Radio Shack settled for $30 million, Rite-Aid Corporation settled for $25 million, Bank of America settled for $22 million, Starbucks settled for $18 million, and Perdue Farms settled for $10 million. In 2001, there were more class-action lawsuits filed seeking overtime pay than class-action discrimination suits.

Below is an example of how to classify an employee as an exempt manager. Worksheets to help classify administrative, managerial, professional, and salesperson exemptions are included in the HR Forms CD, along with all other state and federal required and recommended forms. These forms are also available to Preferred and Online members of the California Chamber at HRCalifornia, and are included in the California Labor Law Digest.

For an employee to be exempt as a manager s/he must:

1. Have primary duties and responsibilities that involve the management of the enterprise.

2. Customarily and regularly direct the work of two or more other employees.

3. Have the authority to hire or fire other employees or to make suggestions, which will be given particular weight, about personnel decisions regarding other employees.

4. Customarily and regularly exercise discretionary power.

5. Spend more than 50 percent of his or her time engaged in managerial duties that meet the tests in Items 1 through 4 and

6. Earn a monthly salary equivalent to at least two times the state minimum wage for full-time employment. The current minimum salary for someone to be categorized as an exempt employee is $2, 340 a month, which is twice the starting minimum wage for full -time employment.

This content comes from an article in the February 2004 issue of the Labor Law Update Newsletter. Online and Preferred members of the Chamber have access to the newsletter on HRCalifornia. Non-members can purchase annual subscriptions to the newsletter.