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Exempt vs. Non-Exempt

One of the biggest misconceptions in California is that paying a salary means companies do not need to pay employees overtime. But this is not the law. Rather, being paid a salary is only the first part of the inquiry. The more critical issue is what job duties the employee is performing on a day to day basis.

Often, companies give employees fancy job titles and job descriptions to make it look like they are exempt under federal and/or California law, when in fact the employee is performing different job functions than those stated in the job description. Companies do this for their bottom line: to avoid paying overtime.

In fact, only certain types of salaried employees who meet very strict tests are, in fact, exempt employees not entitled to overtime pay. Executive, administrative, professional, and outside sales employees are exempt from overtime requirements in California if they meet certain tests regarding their job duties and responsibilities and receive salaries over a specific amount.

Generally, under California law, to be exempt, an employee must:

  • customarily and regularly exercise discretion and independent judgment in performing his duties; and
  • earn a monthly salary equivalent to no less than double the state minimum wage for full-time employment; and
  • be primarily engaged in duties that meet the test of the exemption (usually identified in the applicable wage order)

Note: what is critical in determining whether an exemption exists is the actual requirements and circumstances of the job, not the employee’s job title. Many employers call workers exempt even when they should not. Often this is unintentional. However, even a good-faith mistake does not relieve the employer of the duty to pay you overtime.

Independent Contractor vs. Employee

Another common California employee misclassification occurs when an employer seeks to avoid paying overtime to an employee by claiming that they’re an independent contractor and not an employee.

Because independent contractors are not full-time employees, companies save costs on things such as Social Security, Medicare, unemployment and workers’ compensation insurance, and benefits. However, many workers that are called independent contractors shouldn’t be.

There is a rebuttable presumption under California law that any worker is an employee. It’s up to the employer to provide specific proof that the worker is an independent contractor as opposed to an employee.

The strongest cases involve workers at mid-sized to large companies; employers violate the law if they are paying people as independent contractors who should be paid as employees (W-2) and should receive employee benefits such as paid overtime, health benefits, meal breaks, and so on.

Are You a Victim of Employee Misclassification in California?

If you believe your employer has misclassified you as an exempt employee or independent contractor, contact Glick Law Group to discuss the possibility of pursuing an employee misclassification claim and recovering unpaid overtime wages to which you may be entitled. We offer free consultations.