• Nicholas Lansdown

What is "Exempt" Employee-Status Misclassification?

What is "Exempt" Employee-Status Misclassification?

Misclassification as a salary-exempt employee is a common labor code violation that employers commit to obtain the most work from an employee without paying any him or her any overtime. 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 basic rule, "non-exempt" employees are hourly and are entitled to overtime pay the employee works more than 8 hours in a day or more than 40 hours in a week. However, should the employee be classified as a "salary-exempt" employee, the employee is paid a flat rate for all hours worked and is not entitled to overtime pay, or other basic labor code protections.

As you can see, employers, when faced with being required to pay employees overtime, make a business decision and choose to misclassify their employees as "exempt." This practice is known as intentional misclassification.

Can Salaried Employees Still Be "Non-Exempt?"

Yes. Employers classifying its employees as non-exempt is becoming more frequent. A salaried non-exempt employee is essentially an hourly worker. The salaried non-exempt employee is compensated equal to the number of hours he or she works, usually fixed at 40 hours a week. Should the employee work more than 8 hours in a day or 40 hours in a week, he or she would be entitled to overtime. Conversely, a salary-exempt employee has no time restraints and is not eligible to receive overtime compensation.

Often, employees do not know there is a difference between exempt-salaried and non-exempt-salaried. As a result, when an employee knows that they are being paid a salary, they mistakenly believe they are salary-exempt and do not have a right to overtime pay. Employers like to exploit their employee's understanding and will not pay them at the appropriate rate.

Who Are "Exempt" Employees?

Most "salary-exempt" employees fall into one of the below categories. Each exemption has several 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 or local minimum wage;

  • 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 or local minimum wage;

  • 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 or local minimum wage;

  • 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.

What should I do if I have been misclassified as a salary-exempt employee?

If your employer has classified as a salary exempt employee, if you've not done so already, you should immediately start to keep track of your time. You should also go back and create a time log of hours you've worked off the clock. You should have been compensated for all the time that you spent working off the clock. Failure to do so equates to the employer's failure to pay you a minimum wage for all hours worked. Then, you should consult with an experienced misclassification attorney. Often in claims of employee misclassification, your employer has also committed other labor code violations.

Lansdown Law - Experienced Misclassification Attorney

Lansdown Law has experience in handling cases where employers have intentionally misclassified their employees as salary-exempt in violation of the California Labor Code. If your employer has intentionally misclassified you, give us a call and we can discuss your options and your next steps!

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Disclaimer: All materials have been prepared for general information purposes only to permit you to learn more about Lansdown Law, its services, and experience. The information presented is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice.