Employment classifications explained

Ensuring your employees have the correct exemption status is extremely important, especially in California. Employee exemption status is a classification that determines whether an employee is eligible for overtime pay in addition to required meal and rest breaks.

There are two types of employee exemption statuses in California: exempt and non-exempt. Exempt employees are not entitled to overtime pay, while non-exempt employees are. Understanding the difference between the two is crucial for employers, as misclassifying employees could lead to financial penalties and other consequences. 

Exempt Employees

To be considered exempt in California, an employee must meet two criteria: a salary test and a duties test. For the most common exemption classifications (administrative, professional, executive), the salary test is two times the state minimum wage. As of January 1, 2023, the state minimum salary threshold is $64,480. 

Exempt employees must also perform duties that qualify as “exempt level duties.” These include managing the business or a department and supervising two or more employees. Administrative duties include office or non-manual work related to the management or general business operations of the employer or the employer's customers. The professional exemption applies to those whose work requires advanced knowledge in accepted professions such as accounting, law, medicine and teaching. 

Exempt employees are not entitled to overtime pay, but they are still subject to minimum wage and other labor laws. Our consulting team is available to assist you in navigating additional exemption classifications (inside and outside sales, computer professional etc.).

Non-Exempt Employees

Non-exempt employees are entitled to overtime pay for any day on which they work more than eight hours, or more than 40 hours in a workweek. Overtime pay is calculated at one and a half times the employee's regular rate of pay. Non-exempt employees must be paid at least the state minimum wage for all hours worked.

It's important to note that simply paying an employee a salary does not automatically make them exempt from overtime pay. The employee's job duties must also meet the criteria for exemption.

Final Thoughts

As an employer in California, it's essential to understand the differences between exempt and non-exempt employee exemption status. Reach out to our team for guidance.