Exempt Misclassifications: Salaried verses HourlyEmployee Pay

A common error under both federal and California wage law is the misclassification of employees as “exempt” from overtime pay, when such employee are actually non-exempt, hourly employees under the applicable law. The ‘tests’ to qualify for ‘exempt’ status are similar under both the federal FLSA and under CA wage law.

‘Exempt’ employees must satisfy both a ‘salary test’ and a ‘duties’ test. The salary test requires that exempt employees receive a predetermined amount of pay (for each year or each work/pay period) which is at least twice the amount of pay based on minimum wages and which is not subject to reduction or variation based on the quantity or quality or the work performed. The ‘duties’ tests vary somewhat for Executive, Administrative and Professional exemptions, but all require the regular exercise of independent judgment and discretion by the exempt employee (as opposed to non-exempt employees following detailed directions under close supervision or under numerous requirements set by the employer).

Misclassification of employees as ‘exempt’ when their pay and duties dictate that they are really non-exempt, hourly employees – - combined with such employees working significant hours (above eight hours per day and/or above 40 hours per week) – - can result in significant overtime pay owed. Even if the pay provided to such misclassified employees is found to ‘cover’ all the hours worked, a portion of overtime pay for the hours which surpass the applicable overtime pay trigger will be owed, since overtime pay is either time and a half or double time pay.

If you are an employee OR an employer with specific questions regarding the classification of employees as exempt versus non-exempt, hourly CONTACT our Wage and Hour Lawyers.