Exempt vs Non Exempt California Law

The one take away from this article on exempt vs non exempt employee: an exempt employee is not entitled to overtime pay; however, the exempt employee must be paid a monthly salary that is double the minimum wage in a 40 hours work week.  You can now be lawyer! No really. Figuring out if an employee is exempt or non exempt may be difficult.

Employees are separated into two categories: exempt vs non exempt. The division between exempt vs non exempt is important to understand because each has certain rights. Usually, a non-exempt employee benefits more than an exempt. Therefore, it is in the best interest of an employee to be a non-exempt employee and in the best interest of the employer to hire on exempt employees. In order to further understand the difference, this article will define both and explain the salary requirements/rights given under each status.

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Difference Between Exempt vs Non exempt Employee

In California, non exempt employees have the right to

1. Overtime pay when working over 40 hours[1][2];
2. Right to be paid minimum wage (currently not less than $10)[3]; and
3. Right to certain breaks including lunch/dinner.[4]

These entitlement applies to non-exempt employees. There are certain times when an employee is not entitled to these benefits and will be labeled as exempt employees.[5]

In order to be exempt, the employee must meet certain requirements.[6] These include:

• Making at least twice California’s minimum wage
• Duty to use his or her own judgment in the workforce
• Employee works in administrative or executive decision making[7]

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California Minimum Salary Requirements For Exempt Employees

As of 2020,

• Employers with 25 or fewer employees: the minimum salary for exempt white-collar workers is $54,080
• Employers with 26 or more employees: the minimum salary for exempt employee is $49,920. If an exempt employee’s salary drops below the minimum salary requirement, the employee may no longer be considered exempt.

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Exempt Employees Make Their Judgment

California laws require exempt employees to make their own judgment.  If the minimum wage requirement is met, the next factor to analyze is whether the exempt employee makes his own judgment while working; specially, does this employee assert his or her control or does the employer inherently have the control? Control arises when an employee can usually set his or her own time, use his or her own equipment, and finish the task at hand as he or she sees fit. California has several tests it utilizes and follows in order to determine whether the employee asserts his or her own control.

Examples of exempt employees

An exempt employee is one who receives a salary. In most salary positioned jobs, if a project is due tomorrow, you must finish it even if you have already worked a normal eight-hour day.

Lawyers are Exempt Employees

This is seen more often than not in the legal world where lawyers have motions and client meetings to prepare for but are dropped with a new case at the end of the day. If a document is due the next morning and it is already 4 p.m., the lawyer has no choice but to stay and finish it without any further pay. This also may happen in any administrative or office job. The normal 9 to 5 day can be thrown out the window because the employee is viewed as exempt and must complete the tasks at hand.

Union employees or Exempt Employees

Union employees may be exempt from overtime benefits depending on the agreement. If the agreement provides:

• For wages, hours of work, and working conditions;
• Premium wage rates for overtime hours worked; and
• Hourly rate of at least 30% more than minimum wage.[18]

Outside sales person are exempt employees

these people are considered exempt under California law as long as he or she is:

• At least 18
• Spends more than half his or her time working outside the employer’s office and
• Sells services, items, or facilities[19]

An example of a sales person would be a door-to-door salesman like one who sells vacuums or knives.

Professional Licenses Exempt Employees

Employees who have professional licenses (not vocational licenses) are often considered exempt employees. Exemption embodies a few professions including most teachers (private school or tutors as well) and physicians. First, physicians can be exempt if:

• Paid $55.00/hour
• Perform duties that require a license (like surgery)[20]

Teachers are Exempt Employees

Teachers, on the other hand, are usually exempt given their governmental position but a private teacher can also fall under this category if:

• Teaches at a private elementary or secondary institution where students are in kindergarten to 12^th[21]

Commission Workers May be Exempt Employees

Those employees who receive commission can also be categorized as exempt if:

• Earnings are more than on and half times minimum wage or
• Commission is more than half of totally payment.[22]

These are just a few of the exemptions that may apply. The U.S. Department of Labor gives further detail and outlines other types of exemptions depending on your industry.

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Legal Reference

[1] Employment Determination Guide: Manner and Means Test

[2] Labor Code § 510(a)

[3] Labor Code § 1182.12(a)

[4] Labor Code § 512(a)

[5] Labor Code § 515(a)

[6] Labor Code § 515

[7] Labor Code § 515(a)

[8] Cal Labor Code § 1182.12(a)

[9] Cal Labor Code § 1182.12(a)

[10] Cal Labor Code § 1182.12(b)(1)(A); Cal Labor Code § 1182.12(b)(1)(B); Cal Labor Code § 1182.12(b)(1)(C)

[11] Cal Labor Code § 1182.12(b)(2)(A); Cal Labor Code § 1182.12(b)(2)(B); Cal Labor Code § 1182.12(b)(2)(C)

[12] Estrada v. FedEx Ground Package System, Inc. (2007) 154 Cal.App.4th 1, 10.

[13] Estrada v. FedEx Ground Package System, Inc. (2007) 154 Cal.App.4th 1, 4.

[14] Gov. Code § 12940, subd.(j)(5)

[15] Gov. Code § 12940, subd.(j)(5)

[16] Futrell v. Payday California, Inc., 190 Cal. App. 4th 1419

[17] Futrell v. Payday California, Inc., 190 Cal. App. 4th 1419

[18] Labor Code § 515(a)

[19] 29 C.F.R. § 541.602(a)(5)

[20] 29 C.F.R. § 541.602(a)(5)

[21] 29 C.F.R. § 541.600(a)

[22] Labor Code § 512

[23] Cal. Code of Regs., tit. 8, §§ 11010–11170

[24]Labor Code § 515.6

[25] Labor Code § 515.8(a)

[26] 29 CFR § 778.117