Overtime Pay Laws in California & Exemption Laws

Matthew A. Kaufman is a dedicated labor lawyer representing employees in disputes against their employers to do with the California overtime pay rules and regulations.

If you need experienced representation by an overtime lawyer please contact Mr. Kaufman at 866-278-2385 or Email here.

Topics

Overtime Pay Laws
How to Calculate Overtime Wages
The Executive Exemption
The Administrative Exemption
The Professional or Learned Artistic Exemption
The Computer Programmers Exemption
The Outside Salesperson Exemption
The Law's Prohibition Against Retaliation Against Employees

California Overtime Pay Laws

Overtime pay is additional compensation for working over 40 hours a week, and in California, over 8 hours in a day. Whether someone should receive overtime pay depends on the work that they do, but these general rules and regulations apply to all employees:

  • California pay laws are designed to protect employees, and the courts construe them to give employees the maximum protection. Employees are presumed to be entitled to overtime pay, and, under California and federal law, the employer, not the employee, has the burden of proof to show that it properly paid the employee.
  • An employee's right to overtime pay does not depend on whether an employee is salaried. Many salaried employees are entitled to overtime pay.
  • Work activities, not job titles and responsibilities, govern whether you are entitled to overtime pay. In California State, the law looks to what employees do over half their work time. While employers
    sometimes give employees untrue job titles for the purpose of avoiding overtime pay, this does not
    affect employees' rights.

An employer must pay overtime in the state of California unless it can prove that an employee is "exempt" from the overtime law requirements. "Exempt" employees do not get overtime pay.

The exemptions are briefly listed as follows:

The Executive Exemption - This exemption applies to employees who spend over half their work time managing businesses or departments of a business;

The Administrative Exemption - This exemption applies to employees who spend over half their work time assisting the proprietor or other exempt individual in "servicing" a business in matters of significance;

The Professional Exemption - This exemption applies to employees who have certain licenses to practice a profession or who work in a "learned or artistic" profession;

The Computer Software Professional Exemption - This exemption applies to employees who work in highly theoretical aspects of computer software and make over $41.00 an hour;

The Outside Salesperson Exemption - This exemption applies to employees who usually work away from the workplace making sales and filling orders. However, the employee cannot spend significant time doing the same work as other non-exempt employees.

How to Calculate Overtime Wages

In California, for each hour worked over 40 per week or over 8 per day, an employee must be paid one and one-half times their regular rate of pay. Employees in California can recover overtime wages earned as far back as four years ago.

To determine the overtime rate of pay in the cases of salaried employees, Ca provides that a salary compensates for only 40 hours of work per week. Thus, if an employee is paid $600 a week in salary, the employee's overtime rate of pay is computed by dividing $600 by 40. In that example, $15 per hour is the employee's regular rate of pay. For each hour worked over 40 hours a week, the employee is entitled to be paid $22.50 an hour.

Some employers try to skirt the overtime payments by claiming that overtime pay is included in a fixed salary, by paying a lump sum amount for overtime no matter how many overtime hours are worked, or by paying overtime pay as a bonus. These are all prohibited methods.

The Employers Defenses

"Exemptions" are employers' legal defenses to paying overtime pay. The employer carries the burden of proving these defenses in court to prevent recovery of overtime pay.

Advice

If you feel something wrong is going on, call a labor lawyer such as myself at 866-278-2385 or email me here. You will only benefit by getting advice from someone who has experience with the California overtime pay laws.

The Executive Exemption

Employers most commonly assert the "Executive Exemption" as their legal defense in overtime cases. For an employee to qualify as exempt under the "executive exemption," the employer must prove all of the following about the employee:

The employee's duties involve actual management of an enterprise or recognized department of a business;

The employee spends over half of his or her weekly work time engaged in actual exempt work. What constitutes "exempt" and "non-exempt" executive work is discussed in the "What You Should Know" section below;

The employee directs the work of two or more other employees (or the equivalent of 80 hours a week of subordinate time);

The employee can hire or fire other employees, or make recommendations (which are actually given weight by the employer) on hiring, firing, or promotion of other employees;

The employee customarily and regularly exercises discretion and independent judgment on the job. What constitutes "discretion and independent judgment" is discussed more fully in the "What You Should Know" section below; and

The employee must be full-time and salaried. The monthly salary must be twice California's minimum wage for full-time employment, or $1,993.33 a month. Being paid a "salary" has a special legal meaning and is discussed more fully in the "What You Should Know" section below.

If the employer cannot prove all of the above elements, the employee is "non-exempt" under the executive exemption and should be paid overtime.

The Administrative Exemption

This exemption applies to people who assist or administrate in the business affairs of the employer or the customer. An administrative employee must work directly with an exempt employee or under only general supervision, and administrative work cannot involve making the products or performing services which the employer sells or markets.

Description of The Administrative Exemption:

For an employee to be exempt under California's administrative exemption, the employer must prove all of the following about the employee:

The employee's duties and responsibilities require office or non-manual work directly related to management policies or general business operations of the employer or employer's customers; and

The employee does one of the following:

  • regularly and directly assists the business' proprietor or another exempt employee,

    who performs, under only general supervision, work along specialized or technical lines requiring special training or knowledge, or

    who executes special assignments and tasks under only general supervision; and

The employee spends over half of his or her weekly work time engaged in exempt administrative duties. What constitutes "exempt" and "non-exempt" administrative work is discussed in the "What You Should Know" section below; and

The employee regularly exercises "discretion and independent judgment." What constitutes "discretion and independent judgment" is discussed more fully in the "What You Should Know" section below; and

The employee must be full-time and salaried. The monthly salary must be twice Ca's minimum wage for full-time employment, or $1,993.33 a month. Being paid a "salary" has a special legal meaning and is discussed more fully in the "What You Should Know" section below.

If the employer cannot prove all of the above elements, the employee is "non-exempt" under the administrative exemption under California Law.

What You Should Know About The Executive and Administrative Exemptions:

What is "Executive" Work For the Purpose of the Executive Exemption? The executive exemption applies only to employees that spend over half their time on management work. Job titles are not determinative; rather the law looks to what employees actually do on the job. Examples of exempt, management work include:


• Interviewing and training employees;
• Adjusting pay rates and work hours;
• Directing the work of subordinates;
• Disciplining employees;
• Planning or distributing work, determining techniques to be used in work;
• Determining materials, supplies, machinery and tools to be used or merchandise to be bought or stocked;

On the other hand, examples of non-exempt work include:

  • Performing the same kind of work as subordinates;
    Making sales, replenishing stock, returning stock to shelves;
    Routine clerical duties, such as bookkeeping, cashiering, billing or filing;
    Making routine inspections;
    Performing production or service work.

    According to California's Division of Labor Standards Enforcement, managers of restaurants, retail stores, service stations and motels are frequently mischaracterized as exempt in where they spend most of their work time cooking, selling on the floor, cashiering, pumping gas, repairing equipment, and acting as a desk clerk.

Assistant managers - employees who assist the manager of a department - often are considered to be non-exempt because they do not regularly direct the work of other employees. Trainees are not usually considered exempt.


What is "Administrative" Work for the Purpose of the Administrative Exemption?

Administrative work means "servicing" a business; for example, advising the management, planning, negotiating, representing the company, purchasing, and business research and control. Additionally, administrative work must affect the business operations to a substantial degree. This includes the formulation of management policies or the responsibility to execute it. Making sales, producing goods, or performing the services that the employer sells or markets is not administrative work.

A recent case, Bell v. Farmers Insurance Exchange, illustrates these points. In Bell, the court found that Farmer's claims representatives were not administrative employees because they spent their time adjusting claims - the main function of the claims offices where they worked. Secondly, the larger and more important claims were handled by supervisors of the claims representatives. The court concluded that their work was limited to "routine" matters which made them more like production workers than administrative personnel. On this basis, the court found them to be non-exempt and entitled to overtime.

Examples of employees who have been found to be entitled to be non-exempt:

  • Escrow workers working for a title company;
    Indoor wholesale salespeople working for an electrical supplier;
    Police detectives and border patrol agents;
    Convention planners employed by a tourist bureau;
    Electronics technicians repairing satellite equipment;
    Insurance claims investigators and adjusters;
    Computer specialists performing simple programming;
    Television news producers and sports broadcasters for television stations;
    Probation officers;
    According to the Department of Labor, run-of-the-mill work performed by bookkeepers, secretaries, and clerks are not performing work directly related to management policies or general business administrative work. Moreover, trainees are non-exempt.

Employers Cannot Rely on Untrue or Unrealistic Job Descriptions to Classify Employees as Exempt.

In examining an employee's work to determine whether he or she is exempt, the law focuses on what the employee should be doing given the realistic requirements of the job. This prevents employers from using an untrue job description to classify employees as exempt, and it prevents employees from becoming non-exempt by doing a bad job. The courts look at what employees are supposed to be doing. This applies to all exemption laws.

The courts will first consider how the employee actually spends his or her time on the job. Then court will compare the employee's work to the employer's realistic expectations, considering particularly whether the employer had any displeasure over the employee's work, and whether this displeasure was itself realistic given the job.

This makes how employees are evaluated, both formally or informally, very important. For example, does your employer compare your sales (which are non-exempt) to the sales of subordinate employees? This makes it more likely that you are non-exempt. What do the employer's formal evaluations say? The list of important things includes practically every aspect of the employee's job. Because of this, an experienced lawyer is required for these cases.

Confusion about the exemption often arises over employees who perform some exempt work but also perform "production" or service work. In California, no matter how many exempt responsibilities an employee has, the employee should be considered non-exempt and entitled to overtime if the job requires that the employee work over half the time in non-exempt work.

The federal law is the opposite from California: generally, it considers the employee's duties over how much time they spend doing any individual task. For example, under the federal law, a court found that Burger King restaurant managers performed exempt management work even while flipping hamburgers, because those employees were thinking about management (an exempt executive task) at the same time. Ca law leads to the opposite result: burger flipping would be non-exempt work time no matter what are the employee's duties or what the employee is thinking about. (In California, if employees are non-exempt under California law, but are exempt under the federal standards, they are non-exempt and entitled to overtime pay!)

What Constitutes "Discretion and Independent Judgment" for the Purposes of the Exemptions?

Most exemptions require that, for an employee to be exempt, he or she must regularly exercise "discretion and independent judgment" in their work. This means that the employee has to evaluate possible alternatives and choose or recommend (and the recommendation is given weight) a course of action. The choice has to be made free from immediate supervision and in regard to important matters of a business. The shipping clerk may decide how to pack a shipment, the bookkeeper decides which ledger to post first, but those relatively minor choices do not count.

Discretion and independent judgment are distinguished from skills and procedures. Employees who merely use knowledge or follow procedures do not use discretion and independent judgment. For example, in Cal, a sportscaster was found not to use discretion and independent judgment; his talent for putting together an entertaining sports newscast came from his skillful application of station guidelines and various techniques which were standard in the industry.

Being Salaried Means No Deductions In Pay

Under state and federal law, if employees are not salaried, they are non-exempt and must receive overtime pay. A salary means that the employee gets paid the same amount each pay period despite lack of work or poor work, attendance or disciplinary problems. The employer generally cannot tinker with an employee's pay. If an employer deducts from an employee's "salary" for the quality or quantity of work performed, the employee is not salaried and not exempt. If there is no work to be done, the salaried employee must still be paid the full salary.

An employer generally cannot dock a salaried employee's pay for disciplinary reasons and keep them "salaried" for overtime purposes. An employer's deduction of less than one day for disciplinary reasons is not allowed. Further, employers cannot dock an employee for partial days missed or poor work and must choose other methods to address the problem. The only exception is for important safety reasons.

Further, a "salaried" worker's pay cannot be subject to deductions for a portion of a workweek for jury duty, attending court proceedings as a witness, or temporary military leave.

Deductions may be made for sick time or absences, but they must be made for periods of one day or longer and according to a bona fide plan or practice of providing extra compensation for such sick time, i.e., sick days.

Employees who are paid hourly wages, on commission, or piece rates, cannot be exempt from payment of overtime under the administrative, executive or professional exemptions.

The Professional or Learned Artistic Exemption

The Professional or "Learned or Artistic" Exemption applies to employees who have a license to practice a profession. However, registered nurses, pharmacists, and most school teachers are non-exempt under these rules.

Description of the "Learned and Artistic" Professional Exemption

For an employee to qualify as exempt under the Professional or "Learned or Artistic" Exemption, the employer must prove all of the following about the employee:

The employee is either (1) licensed or certified by the State of California and is primarily engaged in the practice of law, medicine, dentistry, optometry, architecture, engineering, teaching, or accounting, or (2) spends over half their work time engaged in an occupation commonly recognized as a learned or artistic profession. "Learned or artistic" work can be work that requires an advanced knowledge in science or learning as a result of prolonged learning and study. This work also is creative in character in a recognized field of artistic endeavor and which is predominantly intellectual and varied in character (as opposed to routine mental, manual, mechanical, or physical work).

The employee customarily and regularly exercises discretion and independent judgment on the job. What constitutes "discretion and independent judgment" is discussed more fully in the "What You Should Know" section below;

The employee must be full-time and salaried. The monthly salary must be twice California's minimum wage for full-time employment, or $1,993.33 a month. Being paid a "salary" has a special legal meaning and is discussed more fully in the "What You Should Know" section below.

What You Should Know About The "Learned and Artistic" Professional Exemption

This exemption does not include registered nurses, pharmacists, and most school teachers.

Professionals described by this exemption have prolonged academic study in specialized courses. Someone schooled in a general academic education, or from apprenticeships, or from training in the performance of routine or manual or physical work will not be exempt.

The work or its results cannot be standardized in relation to a given period of time to be exempt.

Like all other exemptions, the employer cannot rely on untrue or trumped up job descriptions to avoid liability.

The Computer Programmers Exemption

This exemption is limited to computer programmers and computer systems analysts. Specifically, this exemption applies to people who spend over half their work time involved in:

The application of systems analysis techniques and procedures, to determine hardware, software, or system functional specifications;

The design, development, testing, or modification of computer systems or programs based on user or system design specifications; and

The testing, creation, or modification of computer programs related to the design of software or hardware for computer operating systems.

However, this exemption is inapplicable to many different types of computer employees, such as trainees, entry-level positions, or people who repair or maintain computer hardware. Look in the "What You Should Know" about the Computer Software Exemption" section below:

Description of the Computer Software Exemption Under Ca Labor Law

To be exempt, a Computer Software Employee must:

Be skilled and proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering;

The employee's hourly rate of pay is not less than forty-one dollars ($41.00) as adjusted by the California Consumer Price Index for Urban Wage Earners and Clerical Workers to January 1, 2001;

Be primarily engaged in work that is intellectual or creative; and

Exercise discretion and independent judgment.

If the employer cannot show all of the above, the employee is non-exempt and entitled to overtime pay and other benefits.

What You Should Know about the Computer Software Exemption:

This exemption does not apply to:

  • Trainees;

    Employees in entry-level positions learning to become proficient in the theoretical and practical application of computer systems and software;

    Employees who do not have the skill and expertise necessary to work independently and without close supervision;

    Employees who merely operate computers. This includes engineers, drafters, machinists who use software such as CAD/CAM;

    Employees who manufacture, repair, or maintain of computer hardware and related equipment;

    Employees who write content for, among other things, the World Wide Web or CD-ROMs;

    Employees who create imagery for effects used in the motion picture, television, or theatrical industry.
    Like all other exemptions, the employer cannot rely on untrue or trumped up job descriptions to avoid liability.

Before September 2000, there was no Computer Software Exemption. Therefore, such employees were, and for that time period, are still entitled to overtime pay. Such employees can recover wages going back three years (and in some cases four years) from today's date, but only up to those wages earned in September 2000.

The Outside Salesperson Exemption

This exemption focuses on the employee's duties and the place where these duties are performed. Under Ca law, an exempt outside salesperson is someone who regularly spends over half their work time engaged in sales away from the employer's place of business.

The federal law is similar except that it requires that exempt outside salespeople cannot spend over 20 percent of their work time engaged in the work of other non-exempt employees. What this means is that if an employee spends significant time doing other duties other than being away from the business selling, then that employee's job merits significant scrutiny to determine the propriety from the outside salesperson exemption.

What you Should Know about the Outside Salesperson Exemption

Like all other exemptions, the employer cannot rely on untrue or trumped up job descriptions
to avoid liability.

The Law's Prohibition Against Retaliation Against Employees

Employers face big penalties if they retaliate against employees who pursue their wages and other benefits. Employers cannot fire, demote or otherwise harass employees because they seek their fair wage. To protect employees, statutes provide for damages, injunctive relief ordering the employer to refrain from prohibited conduct and monitoring the employer's behavior, interest, lawyers' fees and costs.