Exempt vs. Non-Exempt Employees in California

California’s Labor Code provides some of the most employee-friendly labor laws in the nation. The state’s wage and hour laws give California workers robust minimum wage, overtime laws, and meal and rest break protections. However, workers aren’t eligible to receive these protections. Which employees are exempt?

California law presumes that all employees are non-exempt employees. The employer must prove a worker is exempt from the protections, which is a difficult burden. California’s exemptions from the wage and hour protections are strictly applied, favoring non-exempt status. California employers who misclassify non-exempt employees as exempt employees may face severe penalties.

Wage and Hour Protections for Non-Exempt Employees

The California Labor Code is the primary source of the wage and hour laws. The Industrial Welfare Commission (IWC) Wage Orders provide details on overtime, breaks, reporting time pay, paid time off, and split shifts. California’s regulations and case law provide additional guidance.

In general, the wage and hour laws protect each California employee’s right to be paid the right amount and on time. Some California wage and hour laws apply to both exempt and non-exempt employees. Others apply only to non-exempt employees.

The key wage and hour laws that apply only to non-exempt workers require:

• Overtime pay
• Meal and rest breaks
• Specific timekeeping requirements

Let’s take a look at what each of these provides:

Overtime Pay

California’s overtime law requires employers to pay non-exempt workers:

• 1.5x their regular hourly rate for more than eight hours of work in a workday
• 1.5x their regular hourly rate for more than 40 hours in a workweek
• Double time for more than 12 hours of work in a workday
• 1.5x for the first eight hours worked on the seventh consecutive day of work in a workweek
• Double time each hour over eight on the seventh consecutive day

Employers don’t have any leeway with these types of pay for non-exempt workers. Those who fail to properly pay their workers face fines.

Meal and Rest Breaks

California employers must provide non-exempt workers with:

• An unpaid 30-minute meal break after five hours of work
• Paid 10-minute rest breaks after every four hours worked

By comparison, the federal Fair Labor Standards Act (FLSA) and several other states do not require meal and rest breaks.

Timekeeping

When it comes to non-exempt employees, employers must account for each minute worked. The detailed timekeeping requirements ensure non-exempt workers can check their pay stubs to be sure their pay is correct.

A Note on Minimum Wage

California’s minimum wage law doesn’t directly apply to exempt employees. A test for an exempt employee requires a minimum salary of twice the state minimum wage. In this way, exempt employees are also assured a minimum wage.

How Workers Are Classified Under California Law

When it comes to understanding your wage and hour protections, it is important to know if you are exempt, non-exempt, or misclassified. Not having the proper classification can cost you both money and benefits.

Employers Must Prove an Employee’s Exempt Status

California law presumes employees are not exempt from the wage and hour protections. The burden is on the employer to prove an employee is exempt. Employers must prove all three of these elements to overcome the presumption that an employee has non-exempt status:

• Salary basis: The employer pays the employee a fixed salary each workweek, regardless of hours worked. This is distinct from paying an hourly rate or a piece rate.
• Minimum salary: The employer must pay the employee at least twice the current state minimum wage. An employee paid less than the salary threshold is non-exempt. Based on the current California minimum wage of $16.90/hour, the minimum salary for exempt status is $70,304 ($16.90 x 2 x 40 x 52).
• Job duties test: The employee performs exempt duties as an executive, an administrative employee, or a professional. What matters is the work the employee does, not the job title or job description. For example, an employer cannot give the employee the job title “manager” to avoid paying overtime. The employee must actually perform any management-level job duties.

What About Independent Contractors?

Employee classification also matters for employee vs. independent contractor status. While the wage and hour protections do not apply to independent contractors, employers often misclassify employees as independent contractors. If you think your employer has misclassified you as an independent contractor and not an employee, you may want to speak with a California labor law attorney for advice.

The Three “White-Collar” Exemptions

The California Labor Code exempts certain employees from the protections. The so-called “white collar” exemptions, which remove executives, administrators, and professionals from these protections, are the key exemptions. Section One of all IWC Wage Orders further explains the white-collar exemptions.

In addition to the salary basis and minimum salary tests, each white-collar exemption includes specific job-duty requirements for exempt status. The employee must primarily perform duties that meet the job-duties test.

Let’s take a closer look at each of the possible exceptions:

• Executive Exemption: Executive job duties include managing a company or a department, overseeing two or more employees, and having the authority to hire and fire
• Administrative Exemption: Hallmarks of the administrative exemption include performing office work (distinct from manual labor) that requires independent judgment on significant matters, such as management policies or general business operations
• Professional Exemption: Requiring advanced learning, this includes state-licensed professionals such as doctors, engineers, and lawyers, as well as creative professionals who meet certain requirements

There are other exemptions recognized by California. Some are called out in the IWC wage orders, such as inside and outside salespeople. Others, such as computer professionals, are carved out in the labor code. These exemptions may have different pay thresholds and other specific requirements, like the employee’s physical location when working.

Federal Law

California employees are protected under both state and federal wage and hour laws. The parallel federal law is the Fair Labor Standards Act (FLSA). The FLSA covers minimum wage and overtime protections for full-time employees. It also includes exemption tests, but they are often easier for an employer to overcome than California’s requirements. These include:

• Federal minimum salary: The federal minimum salary requirements are in litigation. Although the thresholds were set to increase, the Department of Labor is currently enforcing the 2019 thresholds. The standard salary level from 2019 is $684 per week.
• Federal job-duties tests: These include categories similar to the California tests. Federal tests often have different specific requirements.

When state and federal laws differ, California employers must follow the law that is more protective of employees. This is almost always California law, which tends to offer greater protection in most areas.

Federal law can preempt state law in certain industries and situations. For example, federal law may control in the transportation context (motor carrier, railway, airline, maritime).

Reporting and Enforcement

If you think your employer has misclassified you as an exempt employee, you can:

• Meet with the human resources office for clarification
• File a wage claim with the Department of Industrial Relations
• File a lawsuit in civil court

You can ask your HR department for more information about your exempt status. Whether by mistake or intentionally, employers sometimes misclassify employees as exempt.

The Department of Labor Standards Enforcement (DLSE) enforces California employee rights. Filing a wage claim with the DLSE (also known as the California Labor Commissioner) is an informal and quick administrative process. In most cases, you have three years to file a wage claim related to being misclassified as an exempt employee.

Filing a lawsuit in civil court is also an option. This process is more formal and usually takes more time than a wage claim.

Legal Help for Misclassified Employees

Misclassification is a costly mistake for employers. California employment law favors employees, but it’s complex and can be difficult to navigate on your own. An employer that misclassifies you as exempt may owe you money. This might include back pay for unpaid overtime, meal break and rest period premiums, statutory penalties, and attorney’s fees.

A California labor law attorney can help you determine if your employer has misclassified you. If several of your coworkers are facing similar issues, your attorney may suggest pursuing a class action.