How to Tell if You're "Exempt" from California's Wage and Hour Laws

How to Tell if You're

Employees are provided with a broad scope of protections under California's Labor Law — among these are the wage and hour rules. But these laws only apply to workers classified as "non-exempt." Those who are "exempt" do not have a legal right to the same benefits.

Although the benefits of being a non-exempt employee are clear, it can often be confusing for workers to know whether they fall into this category. Unfortunately, many employees in California are wrongfully classified as "exempt" when they are legally entitled to certain employment benefits such as overtime wages, meal breaks, and rest breaks.

What Types of Employees Are Classified as Exempt?

California and federal wage and hour laws typically do not apply to employees who are "exempt." However, an employer cannot simply designate an employee as exempt by paying them a salary instead of an hourly wage. They may also not require a worker to sign a contract agreeing to be an exempt employee. In order to classify an employee as "exempt," there are stringent legal criteria that must be met under California's Labor Code.

Specifically, the following three requirements must be met for a worker to be an exempt employee for purposes of wage and hour protections:

  • Salary Threshold — To be classified as exempt, an employee must make a salary of at least twice the state's minimum wage for full-time employment. In 2022, the minimum salary threshold is $58,240 for an employer with up to 25 employees, and $62,400 if the employer has 26 or more employees.
  • White Collar Duties — Over 50% of the employee's time must be spent performing exempt job duties, regardless of their job title or description.
  • Independent Judgment — An exempt employee uses discretion and independent judgment in carrying out their employment-related tasks.

The burden is on the employer to justify that an employee meets the criteria to qualify as exempt from overtime. ((Ramirez v. Yosemite Water Co., Inc. (1999) 20 Cal.4th 785, 794.)) Importantly, an employer has the burden to show that the worker is "plainly and unmistakenly" within the terms of the exemption to avoid paying overtime.

Categories of Exempt Employees

In California, there are three main categories of employees who are exempt from the wage and hour laws. Generally, these include executive, administrative, and professional employees. There is also an exemption for outside salespersons and employees in the computer software field.

To qualify for an executive exemption, in addition to satisfying the criteria listed above, the employee must be involved in the management of the business or one of its departments. They must also regularly direct the work of at least two other employees and have authority to make hiring and firing decisions.

Exempt administrative professionals are those whose employment duties involve office work or non-manual work in connection with management policies or general business operations. This means that the employee must be engaged in tasks such as budgeting, auditing, accounting, marketing, human resources, and similar types of duties. Those who perform administrative functions in a school system or educational establishment may also meet the requirements for the administrative exemption.

The professional exemption applies to those who are licensed by the State of California to engage in the practice of law, medicine, optometry, dentistry, architecture, teaching, engineering, or accounting. This category also covers "learned or artistic professions" such as the sciences, creative arts, and those involving predominantly intellectual work.

What Rights Do Non-Exempt Employees Have?

Non-exempt employees who do not fall into any of the above-mentioned categories have a legal right to be compensated overtime pay. Under California law, overtime pay must be issued at the rate of one and one-half a worker's regular pay rate for any hours worked beyond eight in a day or 40 hours in a week. Workers must also be paid time and a half for the first eight hours worked on the seventh consecutive workday in a week. Overtime pay increases to double the employee's regular pay rate if they work more than 12 hours in a day or beyond eight hours on the seventh workday in a row.

Unlike exempt employees, non-exempt employees must also be provided with one unpaid 30-minute meal break if they have worked for more than five hours. They are also entitled to a second unpaid 30-minute meal break if they have worked more than ten hours. However, the first break may be waived by mutual consent of the employer and employee if the shift is less than six hours long. The second meal break may be waived if the first break was taken and the total hours worked do not exceed 12 in a day.

The Labor Law also mandates that non-exempt employees be provided with a 10-minute rest break every two hours.

What Remedies Does an Employee Have if They Have Been Misclassified?

There are a number of reasons employers might misclassify employees as exempt. In some cases, misclassification might be inadvertent. In other instances, employers may intentionally misclassify employees to avoid employment taxes and paying overtime. California employers can face a penalty of $5,000 to $15,000 per misclassification violation. If a court finds that there has been a pattern of willful misclassification, the fines can increase to $10,000 to $25,000.

Workers who have been underpaid due to being misclassified as exempt may be eligible to commence a wage and hour lawsuit to recover their monetary damages — including pay they were entitled to receive, attorney's fees, litigation costs, and interest. If numerous employees were affected by the employer's wrongful actions, it may be possible to file a class action lawsuit. Commencing a case under the Private Attorney General Act (PAGA) is another option that can lead to economic recovery.

Significantly, employers are prohibited from retaliating against employees who make a complaint regarding misclassification. An employee who has been terminated, demoted, or subjected to an adverse employment action because they reported an employer's wrongful misclassification may be able to recover the damages they incurred by taking legal action.

Contact an Experienced California Employment Lawyer

If you have been misclassified as exempt and denied the benefits you are entitled under the law, it's critical to hold your employer accountable. A skilled employment attorney can assess your case and advise you regarding your legal options and remedies. Dedicated to fighting for the rights of workers who have been wronged by their employers, Optimum Employment Lawyers strives to ensure the best possible outcome is achieved in every case. Contact us at (949) 954-8181 to schedule a consultation.

Article References: