California Law: Exempt vs. Non Exempt Employees

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There are various ways to categorize employees such as by type of work performed, longevity and specialty. The way the law categorizes employees that has perhaps the largest effect on employee benefits in California is the exempt vs. non-exempt distinction.

Non-exempt employees get overtime benefits, minimum wage protections and guaranteed work breaks, for example, while exempt employees do not. But it's not always easy to determine who is exempt and who isn't.

Exempt vs. Non-Exempt Employees

Under the California Labor Code, all employees are presumed to be non-exempt employees. This means that their employers must comply with the Labor Code requirements when it comes to benefits like as overtime pay, meal and rest breaks and minimum wage.

Employees are designated as "exempt" if the employer does not have to offer them certain wage and work condition benefits; they are said to be exempt from those requirements. Labeling them as exempt is a financial benefit to the employer, not the employee, so it is the employer who bears the burden of proving that an employee is exempt. If the employer cannot prove it, the employee is classified as non-exempt. It is never enough for an employer to require the employee to sign a statement stating that she is exempt and then pay a salary that exceeds the minimum wage.

To prove that an employee is exempt, the employer must show that she meets very specific requirements for each applicable exemption. Note that there is not one set of exemptions for all Labor Code provisions; an employee may be exempt from some but not from others. However, some exemption requirements apply to all benefit provisions.

Wage Benefits for Non-Exempt Employees

The term "non-exempt employees" includes all employees who do not fall within of the exemptions set out in the Labor Code. These are the employees in California who are protected by various wage and work benefits that mandate certain work conditions for them. One important benefit for non-exempt employees is the guaranteed minimum wage.

The minimum wage in California sets a floor on the hourly salary of all employees who are not exempt. That means all non-exempt employees are entitled to rely on this wage protection.

The minimum wage in California is much higher than the federal wage. Statewide, it is currently set to rise every year until January 1, 2023 when it will be $15 an hour, a rate that applies to all employers. Federal minimum wage is less than half of that amount.

Work Condition Benefits for Non-Exempt Employees

The Labor Code also mandates certain work breaks for employees. This, like the minimum wage, applies to all non-exempt employees, e.g., those that are not proved to be exempt. Under California meal break law, a non-exempt worker who works more than five hours in a workday is entitled to a 30-minute uninterrupted meal break.

He is also entitled to a 10-minute rest break every four hours (or major fraction of that time) worked. Unlike the meal break, the rest breaks must be paid time. The employer is not permitted to keep an employee on duty during these breaks. Overtime pay rules also apply to all employees other than those who fit within exemptions.

Exemptions Permitted in the Labor Code

The only difference between exempt and non-exempt employees in California is that exempt employees fall within an exemption from the protections. It is not always easy to determine whether an employee fits within an exemption, since there are many different exemptions and nuances that affect each one. Employers must analyze the exemptions carefully and may need to seek help from an employment attorney or HR professional.

Generally, to be exempt from wage and other work protections under the Labor Code, an employee must be shown to:

  1. Work at least half her time performing executive, administrative or professional duties.
  2. Regularly use her own discretion and independent judgment to make decisions at work.
  3. Earn a monthly salary. 
  4. Earn a salary that is the equivalent of at least twice the amount she would earn working 40 hours a week at the current state minimum wage.

Sometimes, the categorization of an employee as having executive, administrative and/or professional duties can be simple. For example, if someone is the CEO of a big company, she is clearly exempt. But most of the time, the determination requires an analysis of the type of work she does and how much independence she has, which can be somewhat subjective.

Meeting the Executive Exemption

While individual cases may vary, it is generally accepted that an employee can only meet the executive exemption if his responsibilities involve the management of the enterprise in which he works or of a department within the company. While it is not necessary that he be a CEO, his duties must involve directing the work of others. That is, he must direct the work of at least two other employees with a major say in hiring, firing and promoting the employees.

In addition, in every case, the employee must exercise discretion and independent judgment in performing his responsibilities. He must also meet the salary requirement.

Meeting the Administrative Exemption

An administrative exemption does not require management of others, but it is always non-manual work. To meet the administrative exemption, an employee must spend more than 50 percent of her work time performing office-based work. Her duties must be directly related to the employer's management policies or general business operations or else directly related to the policies and business of one of the employer’s customers.

Like the professional exemption, the administrative exemption requires that the employee “customarily and regularly” exercise her discretion and independent judgment in carrying out work responsibilities. Her job is, in other words, performed with only general supervision, and her work requires special training, experience or knowledge.

Meeting the Professional Exemption

The professional exemption turns largely on the education or specialized training required to perform job duties. To qualify for a professional exemption, an employee must work primarily (over half the time) in a position that requires advanced knowledge in a field, the type of background that is usually acquired by many years of study and education in highly specialized fields.

The professional workforce includes many different types of professions. Therefore, there are specific qualifications spelled out for some categories of positions.

Exempt Computer Professional

One of the categories of the professional exemption is the exempt computer professional. To meet this exemption, the employee must do either intellectual or creative work that requires him to use his own discretion and judgment in making decisions. The work must include:

  • Applying systems analysis techniques to determine hardware, software, or system functional specifications or designing, developing analyzing or checking computer systems or programs based on user or system design specs.
  • Creating, testing, modifying or documenting computer programs related to the design of computer operating systems.

In addition, the employee's work must require that he be highly skilled in applying specialized information to computer system analysis, programming and software engineering. And the employee's salary must meet a threshold amount set by the Division of Labor Statistics and Research.

Other Common Exemptions

Another common exemption from labor protections includes independent contractors. These are independent workers who are not classified as employees at all.

Some exemptions only apply to some of the benefits. For example, those employees who earn at least half their income from commissions and make more than 1.5 times the California minimum wage are exempt as far as overtime benefits go. However, they are protected by other work protections like minimum wage and work breaks.

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About the Author

Teo Spengler earned a J.D. from U.C. Berkeley's Boalt Hall. As an Assistant Attorney General in Juneau, she practiced before the Alaska Supreme Court and the U.S. Supreme Court before opening a plaintiff's personal injury practice in San Francisco. She holds both an M.A. and an M.F.A in creative writing and enjoys writing legal blogs and articles. Her work has appeared in numerous online publications including USA Today, Legal Zoom, eHow Business, Livestrong, SF Gate, Go Banking Rates, Arizona Central, Houston Chronicle, Navy Federal Credit Union, Pearson, Quicken.com, TurboTax.com, and numerous attorney websites. Spengler splits her time between the French Basque Country and Northern California.