Am I Exempt from Overtime Under California's Executive Exemption

Employees in California have a number of requirements that their employers are obligated to give them. This can include meal periods and rest breaks, but the most important is overtime pay. There are several laws on when overtime pay needs to be given. Some employees, however, are exempt from the extra pay that overtime would give them. In this post, we will explore some of the reasons employees may not receive overtime pay. This post will also show you how to figure out if an employee can be classified as exempt under California's executive exemption.

Why Being Overtime Exempt Matters

There is a huge difference between receiving overtime pay and getting a regular wage when more than 40 hours are worked in a week. Being overtime exempt can also determine an employee's overtime pay, as well as their required rest breaks and meal periods. These rights are governed by several laws that are established in the California Labor Code and the Federal Fair Labor Standards Act. The employee's status is determined by which state and federal laws are relevant to the position. If these laws are applicable, a lawsuit can be formed if these benefits are not given to a non-exempt employee.  There are a number of things you should check before you file a claim. Before filing, you should always ensure that you are non-exempt from overtime benefits and pay.

White Collar Exemptions Under California Law

Exempt employees can include a broad group of administrative personnel, executives, and other professionals. These groups can be exempt under California law. To take advantage of these white-collar exemptions, the employer needs to complete a salary basis test and duties test. The salary basis test will require the employees to receive a minimum amount of salary. The duties test decides if an employee is spending more than half of their time performing tasks that are exempt.

Salary Basis Test

All white-collar exemptions have the same requirements for the Salary Basis test. The salary that the employee receives needs to be greater than twice the state minimum wage for full time employment in order to be exempt. A full time work week is 40 hours. The California state minimum wage has been $8.00 an hour since January 1st, 2008. Using these numbers, an employee would need a salary of at least $32,280 each year in order to remain exempt. To figure out this total, take the minimum wage, multiply by 40 hours a week, then multiply again by 52 weeks, and then double the result.

The Duties Test

The duties test focuses on how an employee spends their time while they are at work. In order to be exempt, the employee needs to be spending over half of their time performing tasks defined as exempt. These tasks are defined under administrative, executive, or professional exemptions. In order to determine if the employee is completing these tasks more than 50 percent of the time, it is necessary to evaluate how the employee works and whether or not the employee's duties are realistic expectations from the employer.

Executive Exempt Duties

Employees can be considered to have an executive exemption if they regularly do any of the following tasks:

(1) manage a business or customarily recognized department;

(2) direct the work of two or more employees on a regular basis;

(3) have the authority to fire or hire other employees for the business; and

(4) use discretion and independent judgment regularly.

What it means to Manage a Business or Customarily Recognized Department

Managing a business means more than being a supervisor to two or more employees, according to federal regulations. It is also more than managing a specific portion of the business, or a unit within the company. The employee needs to have the primary duty of managing the business. The business also has to have an ongoing function. (See 29 C.F.R. § 541.104(a) (2001)).

There are plenty of examples of what managerial work can include. Typical duties can include a number of different processes such as training, employee evaluations, interviewing, setting pay schedules and rates, planning new work techniques, handling employee complaints, determining which supplies or merchandise to buy or stock, and more. (29 C.F.R. § 541.102(b) (2001)).

In order for the task not to be considered “managerial” it needs to be performed by subordinates who are non-exempt from overtime pay. (29 C.F.R. sections 541.111, 541.115 (2001))

Directing the Work of Two or More Employees on a Regular Basis

Shared supervision is a responsibility that isn't included when determining exempt duties. The supervision of the same two or more employees needs to rely on a single individual within a business. (29 C.F.R. § 541.105(e) (2001).)

Authority to Hire or Fire Other Employees

An exempt employee needs to be able to fire or hire other employees within the business. (29 C.F.R. § 541.106 (2001)). Should the employee not have this authority, they can still be considered exempt if their opinions and recommendations are heavily used in hiring or terminating employees. This can also be considered if the exempt employee has a lot of weight when recommending promotions of other employees within the company.

Uses Discretion and Independent Judgment Regularly

Discretion and independent judgment refer to the employee making decisions on behalf of the company without immediate supervision. All of these decisions need to be significant and be independently made choices. Some examples can include policy or general operations changes on behalf of the employer. (Nordquist v. McGraw-Hill Broadcasting Co. (1995) 32 Cal. App. 4th 555, 573.)

An employee who is offered routine work that can be completed with no discretion would not qualify for the exemption, because their decisions do not affect the structure of the business. (29 C.F.R. § 541.107 (2001).)

Get More Information

There are more laws about employment benefits then you might think. If you are about to hire new employees and are hoping for an exception, you should contact an attorney to help you determine eligibility. For more information and an evaluation regarding your status, contact the Law Offices of Jacob I. Kiani. Their California law services can provide you with the information you need to make an informed decision about overtime pay and employee benefits.