There is a presumption under California law that all employees are non-exempt employees. What this means is that these employees are exempt from certain California Labor Code requirements including the payment of overtime, meal and rest breaks, as well as the payment of minimum wage. Exempt employees, on the other hand, are exempt from certain wage and hour requirements because of their duties and rate of pay.
The employer, of course, bears the burden of demonstrating that an employee qualifies as exempt. Indeed, simply calling an employee, a manager or supervisor, for example, does not automatically make that employee exempt. Further, an employer cannot make an employee exempt by having the employee sign a contract stating that the employee agrees to be an exempt employee or by paying the employee on a salary basis. In California, there are very specific requirements that an employee must meet to qualify as exempt and if an employer is unable to demonstrate that an employee meets these requirements, the employer can potentially be liable for various wage and hour violations.
Below are some of the more common exempt classifications under California law:
- Executive, administrative and professional employees’ exemption
In order to meet the executive (managerial), administrative and professional employees exemption or “white-collar exemption”, the employee must meet all of the following requirements: (1) Have primary duties that are executive or professional (this generally means that 50% or more of their work time must be devoted to such tasks, such as general business operations); (2) Regularly and customarily exercise discretion and independent judgment at work; and (3) Earn a salary equivalent to at least twice the state minimum wage for full-time employment (40 hours/week) work.
As of January 2023, the minimum salary requirement for an employee to be exempt under the white-collar exemption is $64,480.
- Computer professional exemption
To be an exempt computer professional, the employee must meet the following requirements: (1) The employee is primarily engaged in intellectual or creative works that requires the exercise of discretion and independent judgment; (2) The employee is primarily engaged in duties that consist of one or more of the following: (a) The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications; (b) The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to, user or system design specifications; and (c) The documentation, testing, creation, or modification of computer programs is related to the design of software or hardware for computer operating systems; (3) The employee is highly skilled and proficient in the application of highly specialized information to computer systems analysis, programming, and software engineering; (4) The employee’s hourly rate of pay, or annual salary if paid on salaried basis, meets a minimum threshold amount set by California’s Division of Labor Statistics and Research (DLSR).
Effective January 1, 2023, a computer software employee’s minimum hourly rate of pay exemption from $50.00 to $53.80, the minimum monthly salary exemption from $8,679.16 to $9,338.78, and the minimum annual salary exemption from $104,149.81 to $112,065.20.
- Commissioned inside sales exemption
To qualify as an exempt commissioned inside sales employee, an employee must meet the following requirements: (1) Employee’s earnings must exceed one and one-half times the California minimum wage; and (2) More than half of the employee’s compensation must be commissions.
Employers must note that this exemption is only for the overtime requirement, and other wage and hour requirements such as minimum wage, meal and rest breaks, time recording requirements still must be met.
- Outside salesperson exemption
To qualify as an exempt outside salesperson the employee must: (1) Be at least 18 years old; (2) Must customarily and regularly work more than 50% their work time away from the employer’s place of business; and (3) Must be engaged in selling tangible items or obtaining orders or contracts for products, services, or use of facilities.
- Government and University of California Employees’ Exemption
California overtime and meal/rest break laws do not apply to employees of state or local governments. All employees of the University of California are also exempt from California overtime rules based on the state constitution.
There are many exemptions, and many nuances to each exemption, so if you believe that your employer may have misclassified you as exempt, please feel free to contact our office for a free consultation with an experienced employment law attorney to discuss your options.