Are Salaried Employees Entitled to Overtime Pay?

Overtime Pay

Like most legal answers, it depends.  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 Jose Garay, APLC at 949-208-3400 or dhyun@garaylaw.com.

 

About the Author

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Daniel Hyun is a California Employment Law Attorney and is counsel in Jose Garay, APLC (www.garaylaw.com).  Mr. Hyun earned his law degree from Washington University in St. Louis School of Law and studied as a visiting scholar at UCLA School of Law, ranked 18 and 17 respectively by US News World & Report in 2017.  During law school, Mr. Hyun received the prestigious CALI Award for receiving the highest grade in his Mediation Theory and Practice course and was a Scholar in Law recipient.  He also made the Dean’s list for being in the top 20 percent of his class, and received high grades in Contracts, Torts, Ethics, Pre-Trial Litigation, Mediation, and Asian American Jurisprudence.  Mr. Hyun was also an Associate Editor for Washington University School of Law’s Law & Policy Journal.  Prior to law school, he graduated from the University of California San Diego and double majored in Political Science: Public Law and Communications, and received multiple Provost’s Honors for having a 4.0 G.P.A.

Mr. Hyun is a member of the California State Bar, Orange County Trial Lawyers Association, and California Employment Lawyers Association.  He has played a critical role in prosecuting and settling multi-million-dollar class action lawsuits.  Mr. Hyun litigates wage and hour, and consumer class actions, and single and multi-plaintiff litigation involving discrimination, harassment, retaliation, and wrongful termination lawsuits in California state and federal courts.  Mr. Hyun provides free consultations and may be contacted at 949-208-3400 or via e-mail at dhyun@garaylaw.com.

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