The Difference Between An Exempt and Non-exempt Employee in California

Exempt Employee contract

There are two types of workers in the workplace. “Non-exempt employees,” and “exempt.” What is the difference? California law requires that employers follow California’s requirements regarding overtime pay, minimum wage, meal breaks, and other conditions of employment for non-exempt employees. California law doesn’t require employers to follow these requirements for exempt employees.

Employers can abuse the exempt worker distinction, as you might imagine. Employers may misclassify employees as exempt to avoid complying with the law. Employers can withhold thousands in wages and other benefits from employees who are misclassified. It is important to understand your rights and how you can protect them if your employer considers you an exempt employee.

Fraigun Law Group lawyers are familiar with the California Labor Code, as well as the differences between exempt and non-exempt workers. Employer schemes that violate the law through misclassification can adversely affect your rights as an employee. To find out more, call at 818-981-1800, or visit our online Contact Form. After reviewing your case, our employment lawyers will be able to explain all of your legal options.

The Basic Distinction Between Exempt and Non-exempt employees

California’s Labor Code (and “wage orders”) establish the rules that govern the classification of employees as “exempt.” California law generally exempts workers who are:

  1. Obtain executive, administrative, or professional positions
  2. Commonly use discretion and decision-making in job-related tasks.
  3. A monthly salary equal to or greater than the state minimum wage for full-time employment is possible.

Let’s look closer at each one of these requirements.

Executive, administrative, and professional position requirements: Based on their duties, the California Department of Industrial Relations established three categories of exempt employees:

  • Executive: This role involves you in the management of the company, and employees with authority over hiring or firing.
  • Administrative: This is non-manual labor that is typically associated with office work, clerical support, and general business operations.
  • Professional: The state has granted you a license to practice law, medicine, or any other job that is specified by law.

There are also certain jobs that are exempted, such as outside salespeople or employees of computer companies, if they meet additional requirements.

The Discretionary and Judgment Requirement In determining whether an employee is exempt from certain job-related decisions, it is important to consider how independent you are in your job. If you meet these criteria, you would be exempt.

  • Make job-related decisions based on your discretion and judgment.
  • You can implement strategies without needing approval
  • You are free to decide what course of action you want;
  • You have the authority to make important decisions about how you do your job.

Minimum Salary Requirement. California law mandates that employers pay exempt employees a minimum of two times the state’s full-time wage. Labor Code SS515(a). The minimum wage in California has increased to $15.00 an hour for larger employers with 26 employees or more, and $14.00 an hour for smaller employers with 25 employees or less.

To be exempt, an employee must earn an annual salary of a minimum of $62,400 from large employers and $58,240 for small employers. This is equivalent to a monthly income of $5,200 for large employers, and $4,853.33 for small employers. If your California-exempt salary is lower than these amounts, it’s likely that you have been misclassified as exempt.

A person talking to a lawyer about being an exempt employee

Employers engage in wage theft by misclassifying non-exempt employees as exempt

California law requires employers to pay all non-exempt employees the minimum wage, overtime, off-duty meals, and rest breaks. Employers who misclassify non-exempt employees as exempt are guilty of wage theft. They deprive the employee of minimum and overtime wages, meal breaks, rest breaks, and all other California privileges.

It can have serious consequences if an employee is misclassified as exempt. Consider Sarah, an employee who was exempted because she was paid $40,000 annually (which is less than “two times the state minimum wage for full-time employment). Sarah would have to work on average 50 hours per week. Her employer would then deprive her of 10 hours of overtime each week.

Sarah could sue her employer for misclassification and seek overtime and minimum wages unpaid, as well as other damages. Here are the calculations for those damages. An hourly wage of $19.23 is equivalent to a salary of $40,000 We use a regular rate of $19.23 an hour and an overtime rate of $28.85 an hour to calculate Sarah’s unpaid minimum and overtime wages. Sarah did not receive the additional 10 hours of pay each week. Her damages would amount to $15,000. ($28.85 x 10 hours x 52 weeks) – not including pre-judgment interest and liquidated damages. Sarah could also recover litigation costs in a lawsuit.

California law allows employees to seek overtime and minimum wage for up to four years. These unpaid wages can have a significant impact on your financial situation. Sarah could be able to recover more than $60,000.

Talk to an experienced Los Angeles employment lawyer

Fraigun Law Group can provide confidential, free consultations with an employment lawyer if you have any questions about the rules or believe you may be misclassified as an exempt worker. You can contact our office by calling at 818-981-1800 or using our online form.

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