What Makes an Employee Exempt?

If you’ve ever felt confused about what makes an employee exempt or non-exempt, you’re not alone! Many employers struggle with how to classify their workers. We don’t profess to be attorneys, but we can share some sources and general information that might help you make good decisions about whether an employee is exempt or not.

Exempt from what?

According to Anthony Zaller of California Employment Law Report, “California law presumes that all employees are non-exempt employees, meaning that they are not exempt from the Labor Code requirements, such as overtime pay, meal and rest breaks, and minimum wage. Exempt employees are designated as such because they are ‘exempt’ from certain wage and hour requirements due to their duties and pay.”

But be warned that you bear the burden of ensuring that your workers meet the very specific requirements for each exemption. If they don’t, you still must follow the laws about overtime pay, breaks, and so forth. Zaller lists specifics that qualify workers as exempt for five categories: Executives, Administrative Professionals, Computer Professionals, Inside Salespeople, and Outside Salespeople. (I highly recommend that you take the time to read Zaller’s complete article if you’re unsure about how to classify your employees.)

What doesn’t make your employee exempt

CalChamber offers a few cautions as well.  For one thing, don’t think that an impressive title alone will automatically qualify your employee as exempt. The duties he or she is required to perform are what the California’s Labor Commissioner will examine if the classification comes into question. For instance, the duties of exempt employees must require them to regularly use their discretion and independent judgment. To be classified as exempt, employees must be decision-makers whose job is to evaluate and compare possible courses of action.

Be aware that exempt employees in California must usually earn a minimum monthly salary of at least two times the state minimum wage for full-time employment. With the January minimum wage increase to $10 per hour, you may need to reevaluate the classification of some of your employees. Also, very few deductions, if any, may be taken from an exempt worker’s salary; for example, if your workers are available to work but the company shuts down for a holiday, you may not deduct anything from their pay. (For a good overview of the subject of exemption, read CalChamber’s entire article.)

The rules for what makes an employee exempt or non-exempt are quite specific. To avoid legal trouble, do your research, turn to your legal experts, learn what makes the difference, and classify your employees accordingly. We’re here to help you recruit and hire the best candidates to build your high-performing team, but ultimately, it’s up to you to decide whether your professionals are exempt or not.

Wondering how to get the most from your next hire? Read this.

Click here or call (714) 993-1900 to request an employee or discuss a workforce management issue.

See our upcoming post June 27, 2016: New Rules for Exempt and Non-Exempt Employees