Although some companies may be inclined to put all employees on a salary and to label them exempt, federal and state laws actually determine whether an employee is exempt or non-exempt.
Employers are required to pay employees minimum wage for every hour worked, overtime in accordance with state law and to adhere to certain other laws, such as those regulating meal periods, rest periods and timekeeping. Non-exempt employees may include laborers, clerical staff, administrative assistants, drivers, warehouse workers, nurses and pharmacists, to name just a few.
An exempt employee is an employee who is exempt from overtime pay, and related laws, and is paid on a salary basis. Under California and federal law, employees may be exempt if they are employed in a professional, executive or administrative capacity, earn two times the minimum wage based on 40 hours per week, which is currently $33,280 per year in California, exercise independent judgment and discretion, particularly in matters of significance, and devote more than 50 percent of their time to non-exempt activities.
The employees' job descriptions must meet California's definition for the category. Title alone does not control the classification.
To meet the professional exemption, employees must be licensed or certified by the state and primarily engaged in the practice of law, medicine, dentistry, optometry, architecture, engineering, teaching or accounting, or be engaged in an occupation commonly recognized as a learned or artistic profession.
This excludes pharmacists and nurses, unless they individually meet the criteria established for exemption as an executive or administrative employee. Professional employees also must perform work that is predominately intellectual and varied in character.
To meet the executive exemption, employees' primary duties must include the management of the business or of one of its recognized departments or subdivisions and they must customarily and regularly direct the work of at least two or more full-time employees or their equivalents. They also must have the authority to hire or fire other employees or have particular weight given to their suggestions and recommendations regarding the hiring and firing, advancement, promotion or change of statue of other employees.
Notably, just giving the title of manager to an employee does not allow the employee to be classified under the executive exemption, or any of the exemptions.
Employees falling under the professional or executive exemptions are usually easy to identify. For most companies, it is the administrative exemption, with its confusing and misleading label, that seems to create the most problems.
To meet the administrative exemption, employees' primary duties must include the performance of office or non-manual work directly related to management policies or the general business operations of the employer or the employer's customers. They must regularly and directly assist an executive, owner, proprietor or exempt administrator or perform, under only general supervision, work along specialized or technical lines requiring special training, experience or knowledge or execute special assignments and tasks under only general supervision. Thus, an administrative assistant likely should not be classified under the administrative exemption.
Failing to properly classify employees as exempt or non-exempt can have dire consequences. Labeling all employees as exempt may violate overtime laws.
Companies may end up owing employees for unpaid overtime and related penalties. This is true even where the company “paid the employee more than she would have received” had she been properly paid as a non-exempt employee.
Additionally, failing to treat exempt employees as exempt may cause a waiver of the exemption, again subjecting employers to overtime payment and penalties.
Employers are required to pay employees minimum wage for every hour worked, overtime in accordance with state law and to adhere to certain other laws, such as those regulating meal periods, rest periods and timekeeping. Non-exempt employees may include laborers, clerical staff, administrative assistants, drivers, warehouse workers, nurses and pharmacists, to name just a few.
An exempt employee is an employee who is exempt from overtime pay, and related laws, and is paid on a salary basis. Under California and federal law, employees may be exempt if they are employed in a professional, executive or administrative capacity, earn two times the minimum wage based on 40 hours per week, which is currently $33,280 per year in California, exercise independent judgment and discretion, particularly in matters of significance, and devote more than 50 percent of their time to non-exempt activities.
The employees' job descriptions must meet California's definition for the category. Title alone does not control the classification.
To meet the professional exemption, employees must be licensed or certified by the state and primarily engaged in the practice of law, medicine, dentistry, optometry, architecture, engineering, teaching or accounting, or be engaged in an occupation commonly recognized as a learned or artistic profession.
This excludes pharmacists and nurses, unless they individually meet the criteria established for exemption as an executive or administrative employee. Professional employees also must perform work that is predominately intellectual and varied in character.
To meet the executive exemption, employees' primary duties must include the management of the business or of one of its recognized departments or subdivisions and they must customarily and regularly direct the work of at least two or more full-time employees or their equivalents. They also must have the authority to hire or fire other employees or have particular weight given to their suggestions and recommendations regarding the hiring and firing, advancement, promotion or change of statue of other employees.
Notably, just giving the title of manager to an employee does not allow the employee to be classified under the executive exemption, or any of the exemptions.
Employees falling under the professional or executive exemptions are usually easy to identify. For most companies, it is the administrative exemption, with its confusing and misleading label, that seems to create the most problems.
To meet the administrative exemption, employees' primary duties must include the performance of office or non-manual work directly related to management policies or the general business operations of the employer or the employer's customers. They must regularly and directly assist an executive, owner, proprietor or exempt administrator or perform, under only general supervision, work along specialized or technical lines requiring special training, experience or knowledge or execute special assignments and tasks under only general supervision. Thus, an administrative assistant likely should not be classified under the administrative exemption.
Failing to properly classify employees as exempt or non-exempt can have dire consequences. Labeling all employees as exempt may violate overtime laws.
Companies may end up owing employees for unpaid overtime and related penalties. This is true even where the company “paid the employee more than she would have received” had she been properly paid as a non-exempt employee.
Additionally, failing to treat exempt employees as exempt may cause a waiver of the exemption, again subjecting employers to overtime payment and penalties.