Determining Between Exempt and Non- Exempt Employees under California Law

Why does one need to determine whether an employee is exempt or non-exempt?

For both employers and employees, this is important. Knowing whether one is exempt or non-exempt can help you determine an employee’s classification and therefore apply the legal and proper wages that an employee must receive.

Being exempt means an employee is not subject to the state’s labor code or the federal mandate of the Fair Labor Standards Act (FLSA). In short, an employee does not have to be paid for working overtime.

On the other hand, non-exempt employees are those who are allowed by law to be paid overtime for more than the required hours they have worked.

How do you determine an employee’s exempt status?

• The employer can follow the regulations stated in the state labor code
• In states with no labor code, the employer must abide by the FLSA

In California, the law requires that non-exempt employees be paid overtime for more than eight hours worked in a day, or more than 40 hours worked in a week.

Who are Considered Exempt Employees

• Administrative exemption – It is a commonly used exemption in California. This means that as a general rule an employee is considered an exempt administrator when he regularly exercises discretion and independent judgment, but performs also under general supervision, and primarily engaged in duties that require the exercise of his discretion and independent judgment. These also include positions where an employee has to compare and evaluate courses of conduct and after considering possibilities, makes a decision. An exempt employee must be dealing with matters significant to company policies or that affect business operations or its clients.
• Professional exemption – An employee is exempt as a professional if he is licensed or certified by the State of California and engaged in the practice of law, architecture, engineering, medicine, dentistry, optometry, teaching or accounting. But education or title do not necessarily determine whether an employee is exempt under the professional exemption criteria. To be exempt professional employees must be engaged in the practice and functions of their professions. In addition, he/ she is also exempt if the employee is primarily engaged in an occupation recognized as a learned or artistic profession. These include work that requires knowledge of advanced type in a field or in science and education which customarily requires prolonged course of intellectual instruction. Work that is considered original and creative in character in a recognized field of artistic endeavor is also considered exempt. To be professional exempt, the work must be predominantly intellectual and varied in character and the output cannot be standardized.
• Exempt Executive - These include employees whose duties and responsibilities involve the management of the company, department, or subdivision. The employee must also customarily and regularly direct the work of two or more employees, have authority and/or influence in the hiring, firing, promotion or other change in status of other employees, and be primarily engaged in those managerial duties. This means that the employee must spend at least half or fifty percent of his time engaged in exempt duties, or work that is directly related to those duties.