Many employees are unsure of exempt or nonexempt status as employees. Sometimes they assume they are exempt because of their titles, just because they are given a salary, or simply because their employers tell them so. Below are a some important issues that should be discussed in determining employee status in California, published by the California Chamber of Commerce.
Strict Duties Test
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 Title Irrelevant
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.
Labor Commissioner's Determination
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. Paying an employee a salary does not make them exempt, nor does it change any requirements for compliance with wage and hour laws.
Discretion and Independent Judgment
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.
Federal Salary Basis Rules
While California law has more rigorous standards than federal law, federal law still warrants some attention. For one thing, 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.
Deductions from Salary of Exempt Employees
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:
Unavailability of Work - Do not make deductions when work is unavailable because of the operational requirements of the business, provided exempt employees are ready, willing and able to work. Thus, if July 4 falls on a Tuesday and you shut down the business for the balance of the week, any exempt employee who worked on Monday of that week is entitled to a full week's pay.
State vs. Federal Exemptions
The federal and state governments differ as to the application of exemptions to employees performing specific job duties.
Exemptions for California Employees
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 must be classified as nonexempt.
Professional Employee Exemption
Although an employee commonly may be considered a "professional," there are specific legal requirements that must be met to qualify for the professional exemption.
Computer Professional Exemption
Although federal law has exempted certain computer professionals from overtime for a number of years, state law had no corresponding exemption. California law was amended in 2000 to create an overtime exemption, similar to its federal counterpart, for computer professionals.
For purposes of defining exempt vs. nonexempt status, salespeople are grouped into two categories: outside salespeople and inside salespeople.
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.