ARE YOU REALLY AN EXEMPT EMPLOYEE?

Being misclassified as an exempt employee can cost you significant time and money.

Employers are incentivized to classify their non-exempt employees as exempt.  Often this guise is carried out using lofty titles or job descriptions.

The Department of Labor Standards Enforcement (“DLSE”) has created a chart that lists the employees and job types that are traditionally exempt.  There are many such exemptions, from baby-sitters to sheepherders.  Below are some guideposts to help you navigate the terrain of employee classification.

Because employee classification is a mixed question of law and fact, you should always consult with a qualified attorney to confirm you are classified correctly.

1. ARE YOU BEING PAID ENOUGH?

First, if you are an office employee – are you being paid twice the minimum wage?  Currently the minimum wage in California is $12.00, and more in certain counties (check here for current minimum wage based on employer’s size).  In California, unless you are making twice the minimum wage, you cannot be classified as exempt under any of the administrative, executive, or professional exemptions.

2. WHAT DO YOU DO MOST OF THE TIME?

California uses a purely qualitative test for employee exemptions.  Thus, you must perform exempt work more than half of the time to be classified as exempt.  This test is measured per hour, per day in California.

EXECUTIVE, ADMINISTRATIVE & PROFESSIONAL EXEMPTIONS

You are not exempt from overtime simply because you work in an office or perform other non-manual work.

The executive, administrative, and professional exemptions are meant to apply only to office employees who have the ability to shape corporate policy and general operations.

Administrative employees who have no ability to shape policy or determine operations should not be classified as exempt, no matter how closely the administrative job functions being performed are tied to the employer’s end product or service.

Basically, the rules are meant to divide creative, design, professional, and managerial tasks from technicians, craftspeople, and persons with limited supervisory functions.

Technically exempt are those who are:

• Executive: manage operations, direct the work of two or more employees, and have the ability to hire and fire.  Salary for executives must be twice the minimum wage.
• Administrative: perform work directly related to management policies or general operations, who customarily exercise independent discretion and judgment.  Salary must be twice the minimum wage.
• Professional: licensed and certified professionals, who exercise discretion and independent judgment, and whose salary is twice the minimum wage. Normally applies to law, medicine, dentistry, optometry, architecture, engineering, teaching and accounting.
  • Pharmacists are not exempt as professionals. They may be exempt if they qualify under the executive or administrative exemptions.

Licensed professionals may still be entitled to overtime.  For example, insurance adjusters hold licenses but are still entitled to overtime.  “Learned professionals” such as unlicensed accountants’ assistants are not exempt from overtime, but unlicensed law clerks may be exempt.

The key distinction is the level of independent discretion and judgement used by the employee and, as always under California law, whether the employee uses this discretion more than 50% of the time.

OUTSIDE SALES EXEMPTION

Employees who work more than half of the time away from the employer’s place of business selling tangible, or intangible items, or obtaining orders, or contracts for products, services, or use of facilities may be exempt.

However, there are many cases that demonstrate how this classification is incorrectly applied to delivery drivers and other employees in the field.  For example, workers whose main job is to drive around and service appliances and ancillary to this duty also perform sales, should not be classified as exempt. Thus, a water delivery driver is not exempt simply because she takes orders for new water sales, too.  Again, in California the law looks at actual sales performed, per hour, per day.

As with all exemptions, the employer bears the burden of demonstrating the exemption exists.  The exemptions are affirmative defenses and it is your employer’s burden to establish it is proper to apply in your case.

COMMISSIONED EMPLOYEE EXEMPTION

You cannot be classified as exempt because you earn commission, unless you earn at least 1.5 times the minimum wage in commission, on a workweek basis and earn more than 50% of your income in commission.

In 2014, the California Supreme Court adopted the DLSE’s interpretation that:  “Compliance with the requirements of the exemption is determined on a workweek basis. The minimum compensation component of the exemption must be satisfied in each workweek and paid in each pay period.”  Peabody v. Time Warner Cable, Inc., 59 Cal. 4th 662, 670 (2014) (emphasis in the original).

An employer satisfies the minimum earnings prong of the commissioned employee exemption only in those pay periods in which it actually pays the required minimum earnings.  An employer may not satisfy the prong by reassigning wages from a different pay period.

Even if you are properly classified as a commissioned employee, you are still entitled to many Labor Code protections, including paid, duty-free, rest breaks.

CONFIRM YOU ARE CLASSIFIED CORRECTLY

The right to get all wages you have earned and all of the Labor Code protections you are entitled to is every employee’s right under California law.  That is why the law places the burden on the employer to prove the exemption, not on the employee.

Remember that, on the one hand, the labels your employer uses to define your job are not definitive.  For example, just because you have a fancy title does not mean you are exempt.  You must actually be paid enough and perform exempt work more than 50% of the time.

On the other hand, however, the way that you describe your job may become very relevant.  Employers often look to social media or job search databases to determine if employees are over-stating their qualifications and skills to support their decision to classify employees as exempt.

These issues can be complicated that is why it is so important to speak with an attorney.  Contact Vision Legal, Inc., and speak with an attorney who has experience in exempt versus non-exempt issues.  The analysis of whether you qualify for the exemption can be very fact intensive and it is important that you take the time to run through all the details very carefully to confirm that you are not selling yourself short, or depriving yourself of valuable legal rights and benefits.