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There are two basic types of employees in the workplace: “non-exempt employees” and “exempt employees.” What’s the difference between these two categories? California law requires employers to follow California’s requirements for the payment of minimum wage, overtime pay, meal and rest breaks and many other conditions of employment with respect to non-exempt employees. However, California law does not require employers to comply with these requirements with respect to exempt employees.

As you might expect, the distinction between exempt and non-exempt workers leaves some room for abuses by employers. Some employers misclassify employees as “exempt” to avoid following the law. These employers can withhold thousands of dollars of wages and other benefits from misclassified employees. If your employer treats you as an exempt employee, it’s important to know your rights and how to protect them.

At Custis Law, P.C., our Los Angeles employment law attorneys have in-depth knowledge of the California Labor Code and the differences between exempt and non-exempt workers. We’re also very familiar with employer schemes to violate the laws through misclassification, which may adversely impact your rights as an employee. To learn more, please call (213) 863-4276 or visit our online contact form to set up a free case assessment. Our employment lawyers can explain your legal options after reviewing your situation.

Basic Distinction Between Exempt and Non-Exempt Employees

California’s Labor Code and “wage orders” establish the rules for the proper classification of an employee as “exempt.” California law generally defines exempt workers as those who:

  1. Hold executive, administrative, and professional positions;
  2. Commonly exercise decision-making and discretion in performing job-related tasks; and,
  3. Earn a monthly salary that’s equal to or more than two times the state minimum wage for full-time employment.

Let’s take a closer look at each of these three requirements:

The Executive, Administrative, and Professional Position Requirement: The California Department of Industrial Relations has established three categories of exempt employees based on the duties that they perform as follows:

  • Executive: You are involved with management of the company and employees, with authority over hiring and firing; or
  • Administrative: You perform non-manual labor typically associated with office work and clerical support for general business operations; or
  • Professional: You’re licensed by the state to work in law, medicine, architecture, or other employment designated by law.

In addition, there are some jobs that are specifically designated as being exempt, including outside salespeople and certain employees of computer companies if they comply with additional requirements.

The Discretion and Judgment Requirement: When considering whether the employee exercises sufficient decision-making and discretion in performing job-related tasks to be classified as exempt, the focus is on how much independence you have when doing your job. You would be properly classified as an exempt employee if you:

  • Exercise your own discretion and judgment in making job-related choices;
  • Implement strategies without having to get approval;
  • Are free from direction or supervision in deciding a course of action; and
  • Have authority to make key decisions in how you perform your job.

The Minimum Salary Requirement: California law requires employers to pay exempt employees “a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.” Labor Code § 515(a). As of January 1, 2020, the minimum wage in California increased to $13.00 per hour (for larger employers with 26 or more employees) and to $12.00 per hour for smaller (for smaller employers with 25 or fewer employees).

Therefore, as of January 1, 2020, to qualify as an exempt employee, the employee must receive an annual salary of at least $54,080 for large employers and $49,920 for small employers. That’s equivalent to a monthly salary of $4,506.66 for large employers and $4,160 for small employers. If you are classified as an exempt employee in California and your salary is less than the preceding amounts, you are likely misclassified as exempt.

Employers Engage in Wage Theft by Misclassifying Non-Exempt Employees as Exempt

Employers are obligated by California law to provide all non-exempt employees with the requisite minimum wage, overtime pay, and off-duty meal and rest breaks. Employers that misclassify a non-exempt employee as exempt engage in wage theft by depriving the misclassified employee of the minimum and overtime wages, meal and rest breaks, and other privileges of California law afforded to non-exempt employees.

The consequences of misclassifying a non-exempt employee as exempt can be significant. For example, consider an employee, Sarah, who was misclassified as exempt because she was paid an annual salary of $40,000 (which is less than “than two times the state minimum wage for full-time employment”). If Sarah worked on average 50 hours a week, her employer would be depriving her of 10 hours of overtime each week.

If Sarah were to bring a lawsuit against her employer for misclassification, she could seek all unpaid minimum and overtime wages, among other damages. Here’s how those damages would be calculated. A salary of $40,000 is equivalent to an hourly rate of $19.23. To calculate Sarah’s unpaid minimum wages and overtime wages, we use a regular rate of $19.23 per hour and an overtime rate of $28.85 per hour. Because Sarah was not paid for those additional 10 hours each week, her damages would be equivalent to $15,002 each year ($28.85 x 10 hours each week x 52 weeks), not including the pre-judgment interest, liquidated damages, attorneys’ fees and litigation costs that Sarah could also recover in a lawsuit.

Under California law, employees can seek up to four years of unpaid minimum wages and overtime. Those unpaid wages can be considerable. In this example, for a four-year period, Sarah could recover in excess of $60,000.

Speak to an Experienced Los Angeles Employment Lawyer

If you’d like more information on the relevant rules or suspect that you’ve been misclassified as an exempt employee, please contact Custis Law, P.C. to schedule a free, confidential consultation with an employment law attorney. You can reach our firm by calling (213) 863-4276 or by using our online contact form.



 

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