Exempt Employees and Nonexempt Employees
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Don't make these mistakes that could lead to employee lawsuits.
Some of the most significant class action lawsuits have been the result of an employer's misclassification of nonexempt employees as though they were exempt from California overtime. This section discusses the exempt and nonexempt classifications with particular reference to California standards for minimum salary and job responsibilities.
Exempt vs. Nonexempt Employee Classification
Job Title Irrelevant
Job titles do not determine a California employee's exempt or nonexempt status. An employee with an impressive job title may not qualify as an exempt employee if his/her actual duties do not meet the requirements for one of the exemptions.
Labor Commissioner's Determination
To determine whether the California employee is primarily engaged in exempt work, the California's Labor Commissioner examines the work performed by the employee during the workweek.
Exempt employees in California generally must earn a minimum monthly salary of no less than two times the state minimum wage for full-time employment. Paying an employee a salary does not make them exempt, nor does it change any requirements for compliance with wage and hour laws.
Discretion and Independent Judgment
Most California employees who are classified as exempt customarily and regularly exercise discretion and independent judgment in their jobs. Discretion and independent judgment involve comparing and evaluating possible courses of action and making a decision after considering various possibilities.
Federal Salary Basis Rules
While California law has more rigorous standards than federal law, federal law still warrants some attention. For one thing, the Department of Labor Standards Enforcement (DLSE) has indicated that, although there are differences between the state and federal exemption standards, the federal regulations may serve as a guide where there is no conflict.
Deductions from Salary of Exempt Employees
The "salary test" required for exempt employees provides that the full weekly salary be paid for any week in which any work is performed, with only very limited exceptions. As a result, deductions from the salary of an exempt employee are limited.
There are a few examples of impermissible deductions, including:
- Unavailability of Work - Do not make deductions when work is unavailable because of the operational requirements of the business, provided exempt employees are ready, willing and able to work. Thus, if July 4 falls on a Tuesday and you shut down the business for the balance of the week, any exempt employee who worked on Monday of that week is entitled to a full week's pay.
State vs. Federal Exemptions
The federal and state governments differ as to the application of exemptions to employees performing specific job duties.
Exemptions for California Employees
The executive exemption usually is applied to managerial employees. However, managers still have to meet the requirements for the exemption. If they do not, they must be classified as nonexempt, unless they can meet one of the other exemptions.
The administrative exemption applies to a wide variety of employees. However, not all employees whose jobs involve administrative work will meet the administrative exemption and must be classified as nonexempt.
Professional Employee Exemption
Although an employee commonly may be considered a "professional," there are specific legal requirements that must be met to qualify for the professional exemption.
Computer Professional Exemption
Although federal law has exempted certain computer professionals from overtime for a number of years, state law had no corresponding exemption. California law was amended in 2000 to create an overtime exemption, similar to its federal counterpart, for computer professionals.
For purposes of defining exempt vs. nonexempt status, salespeople are grouped into two categories: outside salespeople and inside salespeople.
Relatively few individuals qualify for exemption as members of artistic professions in California, since most of those who have sufficient control over the nature of their own work and over their work hours are self-employed.
National Service Program Participants
Participants in national service programs, such as AmeriCorps, are exempted from state employment laws relating to wages, hours and working conditions.
HRCalifornia members have access to several tools and services that help those who manage human resource to work through Exempt and Nonexempt-related issues, including:
The Exempt/Nonexempt Wizard is a tool that helps when judging between exempt vs. nonexempt. The tool walks you through a series of questions to help you determine if a job position should be classified as exempt or nonexempt.
Exempt vs. Nonexempt Forms & Checklists
Use this worksheet to help evaluate the exempt versus nonexempt status for your administrative employees.
Use this worksheet to help evaluate the exempt or nonexempt status for your computer professionals.
Use this worksheet to help evaluate the exempt or nonexempt status for your managers or executives.
Use this worksheet to help evaluate the exempt or nonexempt status for your professional employees (such as teachers, doctors or attorneys).
Use this worksheet to help evaluate the exempt or nonexempt status for your sales staff.
Use this form as a guide for defining job duties for administrative employees.
Use this form as a guide for defining job duties for managerial or executive employees.