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Misclassification​
Under California law, employers are required to pay employees for all of their time worked unless the employee is exempt. Any time during which an employee is subject to the control of an employer must be paid as hours worked. At a minimum, the employer must pay the applicable minimum wage. A failure to do so is a violation of California law. If the employee's regular hourly wage is higher than the minimum wage, then the employer must pay the employee at least his or her regular hourly rate of pay for all hours worked. However, any time worked in excess of eight (8) hours per workday or 40 hours in a workweek must be paid at one-and-a-half (1.5) times the employee's regular rate of pay (i.e., overtime). In addition, the employer must pay double the employee's regular rate of pay (i.e., double time) for all time worked in excess of 12 hours in any workday and for all hours worked in excess of eight (8) on the seventh consecutive day of work in a workweek.
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Misclassification primarily occurs in two ways: (1) an hourly employee is classified by his or her employer as being exempt from overtime pay such as salaried employees; and (2) an employee is classified as an independent contractor.
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A lot of salaried employees aren’t aware that they may be entitled to overtime pay. Under California law, the issue is whether the employee is exempt or non-exempt. An exempt employee is not entitled to overtime pay. So how do you know if you’re exempt or non-exempt? For starters, California law presumes that all employees are non-exempt employees and therefore entitled to overtime pay. The analysis, however, does not end there.
The 50% Rule
In order to be considered an exempt employee in California (and therefore not entitled to overtime pay), an employee will generally need to meet a strict duties test in which more than fifty percent (50%) of an employee’s time must be spent performing exempt job duties. Exempt job duties customarily and regularly require the employee to exercise discretion and independent judgment in their jobs. Discretion and independent judgment involve comparing and evaluating possible courses of action and making a decision after considering various possibilities.
For example, a factory line production worker will not exercise much discretion and independent judgment in assembling parts for a product and is unlikely to be exempt from overtime pay. Likewise, a software engineer that engages in routine and repetitive tasks that primarily include standardized configuration, troubleshooting, automated debugging, and testing is not exempt and therefore entitled to overtime pay. In contrast, an executive officer routinely makes business decisions that require him to exercise his discretion and independent judgment.
Job titles are irrelevant to the determination of whether or not an employee is exempt from overtime pay.
Exempt Employees Must Be Paid at Least Twice the Minimum Wage
In addition to the 50% rule of using discretion and independent judgment, an exempt employee must be paid at least twice the minimum wage, and for certain job positions like a software engineer the minimum salary requirement for an exempt employee can be much higher.
For example, as of 2017 a California exempt computer software employee must have an hourly rate of at least $42.35 per hour or a salary of at least $7,352.62 per month (i.e., $88,231.36).
In addition, the “salary test” required for exempt employees provides that the full weekly salary be paid for any week in which any work is performed, with only very limited exceptions. As a result, deductions from the salary of an exempt employee are limited. For example, if your employer closes its business for holidays such as Christmas Eve and Christmas Day and you work the remaining three work days, then you are entitled to a full week’s pay.
Further Requirements for Proper Exemptions
Under California law, employees can fall into a variety of exemptions such as the executive, administrative, and professional exemptions. In addition to the 50% rule and minimum pay requirements, each exemption may have additional requirements. For more information, visit the California Department of Industrial Relations website for an easy to follow breakdown of California overtime exemptions at http://www.dir.ca.gov/dlse/faq_overtimeexemptions.htm or access the Industrial Welfare Commission’s (“IWC”) wage orders at https://www.dir.ca.gov/iwc/wageorderindustries.htm.
California exemptions can be complicated and confusing. A skilled attorney can help you determine whether or not you are entitled to overtime pay. For a free consultation, contact
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For more information or if you believe your employer owes you wages, contact us for a free consultation.