Most wage earners in California understand that they are entitled to mandatory overtime payment if they work more than a certain number of hours in a week. However, both state and federal mandatory overtime laws contain a number of categories who are not subject to the mandatory overtime rules; employees who work under these exceptions are called “exempt” overtime employees. Exempt employees are not entitled to receive mandatory overtime payment. Employees who are not covered by the various exemptions are known as “non-exempt.” Understanding the differences between “exempt” and “non-exempt employees” is one of the most complex and confusing issues in applying the difference.
Comprehending the differences is made even more difficult by the practice of many employers of giving employees false titles in an effort to keep them in an exempt category and thereby obviate the necessity of paying mandatory overtime.
Using misleading titles
Generally speaking, employees who have genuine management duties are considered exempt from mandatory overtime, and employees who merely follow the directions of managers and supervisors are considered non-exempt. Thus, an employer may give an assembly-line worker an important sounding title such as “supervisor” or “manager” even though neither worker exercises independent judgment or makes independent decisions.
California has three standards that define the difference between exempt and nonexempt categories. The first standard is a salary threshold, which must be exceeded by a workers income before the worker can be consider exempt. The salary threshold is twice the state’s minimum wage. In 2021, the minimum wage is $14 per hour. 14 hours X 2080 hours/year X 2 means that a California worker cannot be considered exempt from mandatory overtime requirements unless he or she earns more than $58, 240. The wage test contains a number of allowable deductions that can be used to reduce the employee’s annual income. If the base salary calculation minus the allowable deductions produces an annual salary of less than $58,420, the employee cannot be classified as non-exempt. Finally, California imposes a “duties test” that requires the employee to be performing exempt level work at least 50% of the time in the workweek. An exempt employee must be classified under one of four categories: Administrative Exemption, Executive Exemption, Professional Exemption, outside Sales Professional and inside Sales Professional.
Anyone who thinks that he or she may be entitled to mandatory overtime may benefit from consulting an experienced wage & hour attorney for an evaluation of the facts and an opinion about whether the wage and hour regulations apply.