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 reference to California standards for minimum salary and job responsibilities.
In order to be considered an exempt employee in California, an employee will generally need to meet a strict duties test. For most exemptions, more than fifty percent of an employee's time must be spent performing exempt job duties.
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.
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. Simply paying an employee a salary does not make them exempt, nor does it change any requirements for compliance with wage and hour laws.
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.
While California law has more rigorous standards than federal law, federal law still warrants some attention. 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.
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:
The federal and state governments differ as to the application of exemptions to employees performing specific job duties.
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 thus may need to be classified as nonexempt.
Although an employee commonly may be considered a "professional," there are specific legal requirements that must be met to qualify for the professional exemption.
Certain computer professionals are exempted from overtime if they are engaged in specific high-level computer-related duties, such as systems analysis or software design. The law requires a specific hourly, monthly or yearly salary which is set by the state of California each year.
For purposes of defining exempt vs. nonexempt status, salespeople are grouped into two categories: outside salespeople and inside salespeople. Different tests for exempt status apply to each one.
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.
CalChamber members have access to several tools and services that help those who manage human resource to work through exempt and nonexempt-related issues, including:
Exempt/Nonexempt Wizard »
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 Analysis Worksheet - Administrative Exemption »
Use this worksheet to help evaluate the exempt versus nonexempt status for your administrative employees.
Exempt Analysis Worksheet - Computer Professional Exemption »
Use this worksheet to help evaluate the exempt or nonexempt status for your computer professionals.
Exempt Analysis Worksheet - Executive Managerial Exemption »
Use this worksheet to help evaluate the exempt or nonexempt status for your managers or executives.
Exempt Analysis Worksheet - Professional Exemption »
Use this worksheet to help evaluate the exempt or nonexempt status for your professional employees (such as teachers, doctors or attorneys).
Exempt Analysis Worksheet - Salesperson Exemption »
Use this worksheet to help evaluate the exempt or nonexempt status for your sales staff.
Job Description - Administrative Exemption »
Use this form as a guide for defining job duties for administrative employees.
Job Description - Managerial or Executive Exemption »
Use this form as a guide for defining job duties for managerial or executive employees.