We have written extensively on the labyrinth of California’s wage and hour laws, including the requirements to pay hourly employees minimum wages, provide meal breaks and rest breaks, properly record and pay any and all overtime hours, and provide employees with compliant pay stubs. Some employees, however, maybe exempt from all of these requirements. For a company to avail itself of this exemption pertaining to certain employees, those employees must (1) earn a specified minimum salary and (2) perform duties which fall into a specified classification.

The salary requirement for an employee to qualify for exempt status is a bright line rule where there are no exceptions. In California, to be exempt on January 1, 2020, employees working for employers with less than 25 employees must make $54,080 per year. Employees working for employers with 26 or more employees must make $49,920. This minimum salary amount is set to steeply increase in the coming years. By 2024, exempt employees must earn a salary of at least $62,400.

If employees meet the salary requirement, they will also need to fit into one of the four exempt categories: professional, executive, administrative, or outside salesperson. The professional category applies to workers licensed or certified and primarily engaged in the practice of law, medicine, dentistry, optometry, architecture, engineering, teaching, accounting, or an occupation deemed to be an “artistic profession.”

The executive category applies to workers who manage the company, direct the work of at least two other employees, have the power to hire and fire, and regularly exercise independent judgment.

The administrative category applies to workers who perform office or non-manual work related to management policies or general business operations, and who regularly exercise discretion and independent judgment. The coaches and trainers will not qualify for this exemption.

The outside salesperson classification is special in that the employee does not need to meet the minimum salary requirement above. Instead, the employee need only make minimum wage. The category applies to employees who are 18 years of age, spend over half of their working time outside of the company’s headquarters, and sell goods or services for the employers.

Because of the employee-friendly laws which are currently in place in California, it is a good idea for all employers to regularly conduct an audit of their employees to ensure none are being misclassified as exempt. A non-exempt employee classified as exempt would likely be able to recover for missed meal breaks, missed rest breaks, overtime worked and not compensated, and much more. As we’ve discussed in many articles previously, judgments in these cases can grow exponentially.

If you would like assistance in conducting an audit of your workforce or you believe you may be misclassifying an employee, contact us. We can help.