Exempt vs. Nonexempt Employees

Effective 12/1/16, new federal overtime rules will affect the minimum salary threshold that employees must meet before they can be classified as exempt from overtime. You can find information in Determining Exempt or Nonexempt Employee Status. As the compliance date nears, the HR Library will be updated with additional information.

Federal and state laws exempt certain employees from wage and hour requirements, especially overtime pay and meal and rest break requirements. If you have a problem distinguishing between exempt and nonexempt employees in your company, you are not alone. Some of the largest multimillion-dollar awards of back pay by the courts stem from employers’ misclassification of nonexempt employees as exempt from overtime.

The subject is particularly difficult for California employers, because the state’s exemption requirements create more restrictions than federal law. As defined in the Industrial Welfare Commission (IWC) Wage Orders, California’s requirements exceed even the federal standards adopted by the U.S. Department of Labor in 2004, making those federal standards generally irrelevant to California employees.

However, in May of 2016, the Department of Labor (DOL finalized revisions to federal overtime rules, including revising the federal minimum salary threshold. These federal overtime rules impact California employers because they contain a minimum salary threshold for exempt status that is higher than California’s requirement. You can find more information in Determining Exempt or Nonexempt Employee Status.​

  • Determining Exempt or Nonexempt Employee Status

    Determining Exempt or Nonexempt Employee StatusBecause it is highly litigated, understanding the distinction between exempt and nonexempt employees is critical.  More »

    ​​Read about new 2016 legislation and a new 2015 agency action.​
  • Executive Exemption

    Executive ExemptionThe executive exemption usually covers managerial employees.  More »

  • Administrative Exemption

    Administrative ExemptionThe administrative exemption applies to a wide variety of employees  More »

  • Professional Exemption

    Professional ExemptionThough an employee commonly may be considered a "professional," specific legal requirements must be met to qualify for the professional exemption.   More »

    Read about new 2016​ legislation.
  • Computer Professional Exemption

    Computer Professional ExemptionAn employee is an exempt computer professional if he/she:  More »

    Read about new 2016 legislation.
  • Outside Salesperson Exemption

    Outside Salesperson ExemptionOutside salespeople are exempt from overtime pay, minimum wage, and meal and rest breaks if they meet both of the following criteria  More »

  • Commissioned Inside Sales Employee Exemption

    Commissioned Inside Sales Employee ExemptionWage Order 4 (Professional, Technical, Clerical, Mechanical and Similar Occupations) and Wage Order 7 (Mercantile Industry) contain exemptions for some commissioned sales employees.   More »

  • National Service Program Participant Exemption

    National Service Program Participant ExemptionParticipants in national service programs, such as AmeriCorps, are exempted from state employment laws relating to wages, hours and working conditions.  More »

  • Deductions From an Exempt Employee’s Salary

    Deductions From an Exempt Employee’s SalaryThe "salary test" required to validate overtime exemptions provides that an employee must be paid a full weekly salary for any week in which any work is performed.  More »

The HR Library offers resources and worksheets that will help educate you when you prepare to classify an employee as exempt or nonexempt. Our Exempt Analysis worksheets can guide your decision on classifying the following types of employees: