Overtime wages are a classification of monies that employees can earn when they work more than the stipulated number of hours in a day or a week. The labor laws of California require employers to follow specific rules and pay overtime when employees are expected to work longer hours. However, not all employees are entitled to overtime pay. The laws in California classify employees as exempt or non-exempt. Under the law, exempt workers are not allowed to overtime pay. An exempt worker is a person who is not subjected to the laws of hourly pay and other wages. However, the law also stipulates that their salary must be twice the minimum state wage.
In some cases, an employee may be classified as an exempt worker when they are not and gets denied their overtime compensation. If you suspect that your classification is wrong, and have missed out on your overtime wages, get in touch with the team at Workers Compensation Attorney Law Firm in Los Angeles, CA. We will help you know your rights as an employee as well as help you get the right compensation for you.
Who is an Exempt Employee?
Under California law, an employee can be exempt or non-exempt. The laws that govern compensation for exempt employees are different from those of non-exempt workers. However, there are a few factors that help identify an employee as exempt in the state of California. They include:
- The salary for an exempt worker should be at least two times that of the minimum wage as stipulated by the state
- The duties of the employee must be white collar. This means that exempt employees only perform professional, administrative or executive functions
- The responsibilities of an exempt employee must be based on independent judgment and discretion.
When all the above three requirements are met, an employee is categorized as exempt. This means that they are exempt from overtime, rest breaks, minimum wage, but not from meal breaks. There are, however, jobs that are subjected to a different kind of test. The law also recognizes partial exemption. This means that such employees are protected by individual sections of the labor laws and not by others.
Job-specific exemptions are found in some of the following areas:
- Individuals employed under commission
- Surgeons and physicians
- Teachers employed in private schools
- Outside salespeople
- Employees belonging to a union
- Computer professionals
- Truck drivers
These jobs have distinct exemptions test as compared to the three-part one discussed earlier. Some of these jobs are partially exempt, and we shall discuss them in great detail. Employers can only state an exemption if an employee undoubtedly adheres to the standard requirements for exemption. In cases of doubt, the employee can be categorized as non-exempt. In a nutshell, a worker is exempt if they are salaried and not paid hourly. Moreover, the salary should be at least two times the minimum state wage for people in full-time employment.
Understanding a Salary
Salary is the minimum pay given to an employee, which is unvarying. The payment is predetermined and will not change due to the hours worked or the work quality. The courts have permitted employers to deduct full-day pay from employees in case of absence and still classify the employee as a salaried one. However, if an employer deducts pay for a partial day, the employee cannot be classified as a salaried employee.
If the pay for an employee is calculated on hours worked, and with no amount of wage guarantee, the law provides for the employee to be categorized as non-exempt or an employee on an hourly pay basis.
Calculating Salary under the California Law
The labor laws in California require an employee to get a salary that is twice the amount stipulated under the minimum state wage for employees on full-time employment. This qualifies the employee to be classified as exempt. When a person is in a full-time job, they are required to work for 40 hours a week.
From January 1st, 2018, the minimum wage amounts were revised. Two minimum wage possibilities exist for an employee. If an employee works for an entity having 25 or fewer workers, the employee is entitled to be paid $10.50 an hour as a minimum wage. If the employer has 25 or more workers, an employee is entitled to $11 an hour as a minimum wage.
Based on the above, to calculate the salary for exempt workers, the minimum wage expectation should be doubled and multiplied by the hours that should be worked in a week, which is 40 hours. This is the weekly salary for a salaried employee in California, which is two times the stipulated minimum wage.
Once the salary requirements are met, the employee must be employed in the right category to qualify them as exempt. Exempt employees are normally given what is referred to as “white-collar duties.” These include executive, administrative, or professional duties.
We must, therefore, look at the duties an employee performs to determine if they are executive, administrative, or professional responsibilities. Functions performed are regardless of the title for the job or the definition of the job position. It is important to note that the duties test for white-collar jobs concentrates on the primary tasks performed by the employee. The labor laws of California expect a worker to focus over half of their working hours on the core or primary duties to qualify the test.
If an employee meets the requirement of the white-collar duties test, he or she will be exempted from various rights that include:
- Payment for overtime or extra hours worked
- Having a 10 minute break period for rest
- Receiving a minimum payment as long as the salary requirement for minimum wage is met
For an employer, it is vital to ensure that the employee meets the test requirements to be exempt. It is also essential for an employee to understand their employment rights. Make sure you are in the right category to avoid missing out on fundamental rights and wages.
Here, we discuss the different categories that exempt employees must fall under based on the California Law.
An individual is considered to be employed at the capacity of administration if their core duties are non-manual. Their duties must be related directly to daily business operations or management. When the worker plays an active role in helping with the running of the business, their duties are considered to relate to business operations or management.
Individuals employed as store-clerks, secretaries, lead operators in a manufacturing line, or bookkeepers are not categorized as administrative workers. This is because they are said not to help in the running of the business directly.
Duties that are considered to fall under business operations or management include those of employees mandated with the responsibility. These include research, marketing, quality control, purchasing, and administration of the database, human resource, government or labor relations, finance, and budgeting.
A person is said to be working as an executive or executive capacity if:
- Their core function is the running of a department or the general management of a business or entity
- They have a mandate to engage new employees or fire them, and they can make recommendations on whom to hire or fire, promote, and what to pay them
- They are mandated with the supervision roles and directing of work performed by two or more workers
Management duties include training, hiring and firing, disciplining, and supervisory. Other responsibilities will consist of conflict resolution between workers, employers, and employees, keeping a record of sales or production. Additionally, making purchase orders for materials, keeping an inventory, budgeting, and planning for the business.
Only three kinds of employees qualify as exempt professionals. They include:
- Licensed Professionals – these are individuals certified or licensed by the law in California whose primary engagement is in practicing medicine, optometry, law, dentistry, accounting, teaching, or architecture.
- Learned Professionals – these are individuals with advanced know-how in the field of learning or science that is achieved through specialized study or prolonged learning.
- Creative Professionals – these are individuals whose primary focus is innovation, imagination, invention, talent, or originality in a field recognized as creative or artistic.
Exemption for professional employees is based on specific facts that depend on the type of work the employee majorly engages in. Registered nurses employed to practice nursing do not get classified as exempt professionals. However, if employed as executives or administrators, they can fall under the exemption category.
The laws of California indicate that for an employee to be exempt, they must regularly exercise independent judgment and discretion in the execution of their duties. An employee can do this when they make essential choices and implement them after careful consideration of other alternatives. An employee is also considered to make an independent judgment when their decision is free from direct supervision. This is regardless of having another higher employee that can override their decisions.
Besides the above-explained exemptions, there are other occupations considered to be exempt from the labor laws of California. These occupations include:
Employees on Commission
When an employee is paid on commission, he or she may, at times, be exempt from overtime pay according to the labor laws of California. To be exempted from these laws; however, the following should be met:
- Earnings for the employee must exceed one-and-half times the minimum wage stipulated
- At least over half of the worker’s final compensation must be from commission payments
- The employee must be working either in a professional, clerical, technical occupation or in the retail industry
Commissions are the wages rightfully earned from sales made by employees.
The amount of commission an employee receives is based on the value amount of their sales made. It is worthwhile to note that an employer can decide to withhold other payments like discretionary ones. These include bonus payments regardless of whether they are calculated at a percentage of profits or sales.
Surgeons and Physicians
In some cases, licensed surgeons and physicians are exempt due to overtime payments. To qualify under the exemption, the surgeon or physician must:
- Primarily perform duties and functions that need them to be certified and licensed
- Receive an hourly pay rate of not less than $55 an hour
How this exemption applies is limited. Residents and interns don’t qualify for the exemption; neither do physicians that fall under cover of some collective bargaining agreements.
Because of overtime compensation, individuals employed in the field of computer software can find themselves exempted. Qualifying as an exemption, various requirements for the employee should be met:
- Primarily, the worker should be involved in creative or intellectual work
- Primary duties for the employee must be carried out with discretion and independence
- The worker should have excellent skills in software engineering, programming or computer systems
- Responsibilities of the employee must primarily center on development or computer software, hardware or in design
- The hourly wage for the employee must not be below $42.35
- The annual salary for the worker if deemed salaried must not be below $88,231
Teachers in a Private School
Under the exemption above for professionals, many teachers fall under the exemption. However, some teachers in private schools, even when they fail to meet the criteria, are exempted. If they meet the following criteria; however, they are classified as exempt if:
- Their students are in grades 1 to 12 or are kindergarten going
- Their salary is not less than two times the minimum wage of the state
- They are holders of a baccalaureate or higher degree from an accredited institution of higher learning, and or they qualify for teaching credentials in California.
Workers classified as outside salespeople are categorized as exempt. A person is defined to be an outdoor salesperson if:
- They are older than 18 years
- They spend over half of their work hours outside the business premises of their employer
- They sell services, items, use of various facilities or contracts
Under the California laws on overtime, some drivers are exempted but not from other rights as employees, such as minimum wage requirements, meal breaks, among others. The exemption is only applicable to drivers of hazardous materials or interstate drivers. In such cases, the hours for a driver are governed by California motor vehicle regulations or the federal regulations.
Sometimes, union employees can be exempted from the overtime laws in California. The exemption means that the workers are required to be under the umbrella of a collective bargaining agreement. This agreement indicates the expected wages, work environment, and conditions for employees and the working hours.
Under the collective bargaining agreement, there must be provision for premium compensation rates for overtime hours and a basic hourly compensation rate of not less than 30% more of stipulated minimum state wage.
Other Jobs that are Specific to Exemption
The labor laws in California are, in part, governed by several regulations known as the wage orders. California’s Industrial Welfare Commission issues these wage orders. Various exceptions from the overtime laws in California have been adopted in the wage orders. Besides the previously discussed occupations, special rules on overtime apply to the following jobs:
- Counselors in a camp
- Household employees that live in with the employer
- Retirement homes managers
- Personal attendants
- Drivers and attendants of ambulances
- Specific caregivers that provide 24-hour childcare in residential
- Agricultural occupations.
According to the courts in California, the employees in these occupations must meet the specific standards for exemption. If they don’t meet them, they are expected to be categorized as non-exempt.
The set standards are highly favorable to the employee, with the employer left with the burden to prove exemption.
When employers are unable to treat their workers as non-exempt correctly, they are likely to face severe consequences. The law on labor in California provides various penalties for violations of labor codes. Some of these include:
When employers fail to classify their workers as non-exempt correctly, they will not pay their employees overtime wages. The law in California states that employees must be correctly classified, and if they do not meet any of the above-discussed tests, they qualify for overtime compensation.
If an employee has been denied overtime compensation because of the wrong classification, they have a right to pursue back-pay for the wages they earned on overtime and not paid. These wages can quickly accumulate and add up to a considerable amount, even when an employee's earnings are small.
Besides the back-pay, an employer may find themselves mandated to pay attorney costs and legal expenses the worker incurred as they were seeking their rightful overtime compensation.
The law also provides for the payment of $100 to $200 for each pay period the overtime laws were violated by the employer. The penalties are paid to the state. However, some situations may allow the employee to get 25% or less of the penalties.
Mealtime and Rest Break Penalties
Non-exempt employees are legally entitled to rest and meal breaks. An employer that fails to classify employees correctly may fail in providing these breaks. If a worker misses a meal or a break to rest, the law allows them to get extra pay for an hour according to the standard hourly rate.
If an employee regularly misses their meal and rest breaks, they are entitled to extra hour earnings a day for a missed break and another for lost meal time. This means that if the employee was working on an 8-hour shift, the employer must pay him or her for 10 hours because of the missed break and meal periods.
Pay Stub Penalties
Keeping proper records is essential in any business. Employers may not keep records clearly for the exempt employees because their salaries don’t vary. However, if the employer wrongly classified an employee as exempt, and did not keep records of the hours worked, they will be expected to pay a worker stub penalties. These stub penalties are calculated based on the value of payment periods that lasted under violations.
For the initial stub pay violation, an employee will get $50 as a penalty. After the initial breach, the worker is entitled to payment of $100 for each pay period of violation, to a total not exceeding $4,000.
If the employee does not know the exact back-pay because they were wrongly classified as exempt by their employer, the penalties can go even higher.
Waiting Time Penalties
In cases where a worker has not received their rightful pay because of misclassification by the employer, they may qualify for this payment. If a payment is delayed, it may result in 30 days worth of wages for the employee. The wages can quickly accrue, resulting in more significant amounts of compensation.
If Wrongfully Classified as Exempt, What Should You Do?
Should you suspect that your employer has misclassified you as exempt and you are not, you should:
- Discuss it with your employer and resolve it informally
- If the first option is not attainable, an employee should institute a lawsuit
- Institute a wage claim with the Division of Labor Standards Enforcement (DLSE) in California
To resolve exemption disputes well, the particular situation of the employee matter. However, seeking the advice of an attorney that is well versed with labor laws is an excellent way to start. Even with these options, an employee must understand that there are rules that govern when a claim must be filed.
Deadlines to Filling Claims
Under the law of California, employees have no more than three years to file a wage claim. The time is calculated from the moment the wage became due legally. The normal payday for the working period is what is considered legally due date. However, there are exceptions to these deadlines, as discussed below.
Some claims may require a shorter time to file. However, if an employee wants to claim unpaid wages, they can submit the suit even four years past the legal date of the wage was due. For this more extended provision to apply, the worker must base their filing on violation of a contract that is written down. The employee can also indicate the failure in paying their rightful wages was an unlawful practice in business under the laws of California.
Finding a Los Angeles Workers Compensation Attorney Near Me
After understanding the laws on the exemption in California, you could be asking if you hold a genuine claim over your employer. This is important for one to know because if it is the case, you may be entitled to receive extra compensation for your work. If you feel after reading the above tests that you have been wrongfully classified, seek clarification.
If you want to pursue your compensation, get in touch with us at Workers Compensation Attorney Law Firm in Los Angeles. We will be happy to book an appointment with you and comprehensively discuss the merits of your claim based on the law. Call us on 310-956-4277 and allow us to help you get your rightful compensation.