California Labor Laws for Salaried Employees

According to California laws, workers who get a salary are classified in one of two ways, either as exempt or nonexempt employees. Those who are exempt cannot get paid for overtime. However, there is a minimum salary requirement for exempt workers in order to make up for loss of overtime hourly wages. California labor laws also cover some salaried workers for meal and rest breaks, as well as sick leave, depending on their status.

While nonexempt salaried workers have protection through the state of California's minimum wage laws, those who are exempt receive protection through the state's wage and hour laws. Exempt workers also receive a minimum salary requirement. In order to qualify as exempt, workers must earn at least twice the minimum wage; the state bases this calculation on a 40-hour workweek and additional requirements.

In 2021, California's minimum wage is $13.00 an hour for businesses with 25 or fewer employees and $14.00 an hour for those with at least 26 employees. A person receiving a salary should not get less pay than an employee working the same hours for minimum wage. In California, those who work 40 hours a week should earn a weekly salary of at least $520 or $27,040 annually. Nonexempt salaried workers who work more than 40 hours a week also get overtime — an employer cannot require them to work more than that without overtime pay.

While there is a federal minimum wage of $7.25 an hour, California workers earn more than that. Many California cities and counties have instituted their own minimum wages that are higher than the state's. As a result, local wages must supersede those of the state and federal government.

For example, effective July 1, 2021, in Los Angeles, the minimum wage is $15.00 an hour (or $14.25 per hour for businesses with 25 employees or less). Minimum wages in other cities and counties include:

• Berkeley: $16.07 per hour.
• Oakland: $14.36 per hour.
• San Diego: $14.00 per hour.
• San Francisco: $16.07 per hour, with increases each July 1st thereafter.
• San Jose: Minimum: $15.45 per hour.

California wage and hour laws do not cover most exempt employees. To qualify as exempt, a person must receive a salary no less than two times the state minimum wage for a 40-hour workweek. Exempt employees usually include freelancers, independent contractors, white-collar workers (such as those employed in administrative, managerial, executive, or professional roles), and union workers in specific industries.

For the state to consider a worker an exempt employee, the worker must meet certain requirements in addition to the wage requirements above. They must show employment primarily in executive, administrative or professional roles (the worker dedicates half or more of their time to the duties of such roles) and consistently and customarily exercise their judgment and discretion while carrying out their duties.

As of January 1, 2021, workers must make at least $58,240 a year to qualify for exempt employee status. This is equivalent to an hourly rate of $28, or double California's minimum wage of $14 per hour if a business has 26 or more employees. An exempt employee working for a company with 25 employees or less would need to make an annual salary of $54,080.

California's exempt worker minimum salary is a reflection of the state's minimum wage, so they will both increase at the same time. From 2017 to 2021, California's minimum wage law has increased and will continue to do so through 2023. The minimum salary requirement for exempt workers will increase in these increments:

• In 2022, businesses with over 26 employees will see an increase of the minimum salary requirement to $62,400. Businesses with 25 or fewer employees will see a minimum salary requirement of $58,240.

• In 2023, businesses with over 26 employees will see an increase of the minimum salary requirement to $66,560. Businesses with 25 or fewer employees will see a minimum salary requirement of $62,400.

According to California Labor Code Section 1197.5, employees who carry out "substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions" should get the same pay as other workers who do equal work. Both this law and the Fair Pay Act reduce the disparity in salary between men and women who perform similar jobs. By law, employers cannot pay men more than women for equal work unless there are other factors in play. These include seniority or merit systems, systems of production quantity and quality or bona fide factors such as experience, education or training.

A business must show that these bona fide factors have no basis in gender discrimination and are consistent with business necessity, which the Labor Code defines as "an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve." However, even when it does demonstrate business necessity, the law will not apply if the business can show it has an alternative practice in place that serves the same purpose without creating wage inequality.

While federal law does not require businesses to give employees time off to eat or takes short breaks, California law does. Employers must provide nonexempt salaried employees with a half-hour meal break after five hours of work, but they do not have to pay employees for the break. If an employee works for six hours a day or less, they can give up their right to that break. Conversely, the state entitles a person who works 10 hours to a second half-hour meal break. If the nature of their position doesn't allow for breaks, companies must provide workers with an on-duty meal break; the employee must agree to this in writing, and payment for the on-duty meal period is mandatory.

California employers must also provide rest breaks to nonexempt salaried workers. The state requires them to take a paid 10-minute rest break for every four hours of work. The state also requires that rest breaks occur in the middle of the employee's work time. Employees who work for less than three-and-a-half hours do not have to take breaks. These requirements do not apply to exempt salaried employees.

California's paid sick leave law allows employees to take time off for a health condition that affects themselves or a family member, such as a parent, partner, spouse, child, in-law, sibling, grandparent or grandchild. Workers who are victims of sexual assault, stalking or domestic violence can also take sick leave.

California employees working a minimum of 30 days a year can receive paid sick leave and can use accrued hours toward it after working for an employer for at least 90 days. Workers accrue one hour of leave for every 30 hours, which carries over from year to year, but a business can cap it at 48 hours or six days if it so chooses. Some employees are not eligible for sick leave, including those covered by collective bargaining agreements, air carriers and California In-Home Supportive Services Program workers. In addition, many companies make three days of sick leave available to employees at the start of the calendar year to avoid calculating accrual.

Under California law, if an employee arrives late to work or leaves work early due to sickness or a personal appointment, there is no requirement to deduct money from the worker's paycheck for missing that time. The law does not allow a business to dock the pay of salaried employees as disciplinary measures or as safety violation penalties. Companies also cannot deduct payment to an employee for less than a day. However, there are exceptions to this rule, such as that of a salaried worker who misses a day for reasons that do not involve illness or injury. A business can also deduct a salaried worker's pay for taking days off under the Federal Family and Medical Leave Act.

If a business has benefits in place for exempt employees who are absent as the result of a disability or illness, state law does not require that business to pay for the time the employee takes off, even if they do not have insurance. However, according to United Employees Law Group, the business must maintain a good plan that compensates employees for non-work-related injuries or accidents.

California allows workers to file lawsuits against businesses that violate its labor laws. Successful cases can involve equal pay violations, misclassification of employees, unpaid overtime, or failure to comply with break-time laws. If, for example, a business misclassifies a worker as exempt, they may seek damages for overtime money owed. That same business may also owe them for denied meal breaks.

If a business violates the state's Equal Pay Act, it may have to pay a worker's lost wages, including interest on those wages, attorney fees and liquidated damages. A business cannot retaliate against an employee through a reduction in salary or hours, or firing. If it attempts to do so, the employee can sue for, and recover, damages. They can also recover wages lost due to an employer's acts, interest and equitable relief.

As of January 1, 2020, AB5, California's bill addressing misclassification of gig workers, was enacted into law. It required companies who hired certain independent contractors to reclassify them as employees. AB5 resulted from a California Supreme Court decision that said independent contractors who worked for a company called Dynamex were, in fact, employees. To help companies determine if a worker is an employee or an independent contractor, AB5 includes the ABC test, which assumes that workers are employees unless a business can show that:

• The worker freely performs a service without the control or direction of the business.
• The worker performs job duties that are outside the usual course of an employer's business activities.
• The worker shows customary engagement in an independently established occupation, trade or business of the exact nature involved in the work performed.

The original bill, designed to primarily regulate mobile app companies, did have a small number of exemptions. However, complaints from businesses and independent contractors forced the California Legislature to create AB2257, which added exemptions and expanded those already existing. In 2020, app companies, including Uber, Lyft and Door Dash, backed an initiative, Proposition 22, in an attempt to exempt themselves from AB5. On November 3, 2020, California voters approved the proposition, allowing app workers to remain independent contractors.