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Exempt Employee Misclassification

What is "Exempt" Misclassification?

Misclassification is a common violation committed by employers to extract that most from an employee while avoiding overtime obligations. In California, all employees are "non-exempt" by default, unless the employer can show that the employee meets an exception to the rule. 

 

As a "non-exempt" employee, an employee is hourly and is entitled to overtime pay if he or she works 8 hours in a day or 40 hours in a week.

 

As an "exempt" employee, the employee is paid a flat rate for all hours worked and is not entitled to overtime pay.

Therefore, when faced with paying overtime, some employers will choose to misclassify their employees as "exempt."  When practice is known as intentional misclassification. 

Can Salaried Employees Still Be "Non-Exempt?"

California Minimum Wage Requirements

2020 

  • $12 / hr (25 or fewer employees)

  • $13 / hr (26 or more employees)

 

2019 

  • $11 / hr (25 or fewer employees)

  • $12 / hr (26 or more employees)

2018

  • $10.50 / hr (25 or fewer employees)

  • $11 / hr (26 or more employees)     

 

2017 

  • $10 / hr (25 or fewer employees)     

  • $10.50 / hr (26 or more employees)

Yes.  The difference is that salaried non-exempt employees receive a salary rate for a fixed number of hours while exempt-salaried employees have no fixed number.  When the salaried non-exempt employee's work exceeds the fixed amount, they are entitled to overtime.

 

Employees often do not know there is a difference between exempt-salaried and non-exempt-salaried. As a result, when an employee is promised a salary, they mistakenly believe that they are required to work overtime and not receive any additional money.  However, that is not always true. 

      Who Are "Exempt" Employees?

California Exempt Salary Requirements

2020 

  • $49,920 (25 or fewer employees)

  • $54,080 (26 or more employees)

 

2019 

  • $45,760 (25 or fewer employees)

  • $49,920 (26 or more employees)

2018

  • $43,680 (25 or fewer employees)

  • $45,760 (26 or more employees)     

 

2017 

  • $41,600 (25 or fewer employees)     

  • $43,680 (26 or more employees)

Under California law, the most common "exempt" employees fall into the following categories:  executive, administrative, and professional employees.  Each exemption has a number of factors that are used to determine whether the employee properly falls into that category.

Executive Exemption

 

To qualify for the executive employee exemption, an employee must:

  • Be paid a salary that is at least two times (2x) the state minimum wage (See chart);

  • Have primary duties managing the business, or managing a customarily recognized department or subdivision of the business;

  • Customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and

  • Have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

Administrative Exemption

To qualify for the administrative employee exemption, an employee must:

  • Be paid a salary that is at least two times (2x) the state minimum wage (See chart);

  • Have primary duties in the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and, 

  • Have primary duties which include the exercise of discretion and independent judgment with respect to matters of significance.

Professional Exemption

To qualify for the administrative employee exemption, an employee must:

  • Be paid a salary that is at least two times (2x) the state minimum wage (See chart);

  • Have a primary duty concerning the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment.

In addition, the advanced knowledge must be in a field of science or learning and must be one that is customarily acquired by a prolonged course of specialized intellectual instruction.

As you can see, there are a lot of different variables to consider with misclassification issues.  Given the number of variables, it is best to talk to an experienced misclassification attorney to determine whether you have been properly classified as "exempt" by your employer.

 

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