The Difference: Exempt vs Non-exempt Employee in California

Generally, the exempt employee must earn a monthly fixed salary equivalent to no less than two times the state minimum wage for full-time employment (See: Labor Code 515a). The duties test for white collar exemptions requires exempt employees to be “primarily engaged” in certain duties (see below for each exemption). In California, an exempt employee must spend more than one-half of his or her time engaged in exempt work (quantitative test).

Executive Exemption

A California employee qualifies for the executive exemption if the employee:

  • Primarily manages the business.
  • Regularly exercises discretion and independent judgment.
  • Regularly directs the work of two or more employees.
  • Has the authority to hire/fire and advance/promote employees.
  • Earns a monthly salary equal to at least two times the state minimum wage for full time-employment (i.e., 40 hours a week).

Administrative Exemption

A California employee qualifies for the administrative exemption if the employee:

  • Primary duty of performing office or non-manual work directly related to the management or general business operations of the employer or the employer's customers and ...
  • Customarily and regularly exercises discretion and independent judgment in the performance of intellectual work which, in the context of an administrative function, is office or non-manual work directly related to management policies or the general business operations of the employer or the employer's customers.
  • Regularly and directly assists a proprietor or an exempt administrator, or performs, under only general supervision, work along specialized or technical lines requiring special training, experience or knowledge, or executes special assignments and tasks under only general supervision.
  • Devotes more than 50% of time to these activities.
  • Earns a monthly salary equal to at least two times the state minimum wage for full time-employment (i.e., 40 hours a week).

Professional Exemption

A California employee qualifies for the professional exemption if the employee:

  • Has a license or certification by the state of California.
  • Works primarily in the practice of law, medicine, dentistry, optometry, architecture, engineering, teaching or accounting.
  • Has advanced knowledge typically acquired by a course of specialized study/apprenticeship.
  • Regularly exercises discretion and independent judgment.
  • Earns a monthly salary equal to at least two times the state minimum wage for full-time employment.

Computer Software Occupations Exemption

Federal law handles the overtime exemption for computer workers through regulations as a subset of the professional exemption. A California employee qualifies for the computer software occupation exemption if the employee primarily applies systems analysis or designs, develops, documents, analyzes, creates, tests or modifies computer systems or programs.

The salary test for this exemption is different from the test for white collar exemptions. In order to qualify for the exemption, in 2016 the employee must earn no less than $41.85 per hour. Alternatively, as of January 1, 2016, the employer may pay the employee on a salary basis of not less than $87,185.14/year for full-time work, where the employee is paid at least once per month in an amount not less than $7,265.43. Guaranteed incentive compensation that is paid less frequently than once a month cannot be counted in meeting these minimums. The California Division of Labor Standards (DLSE) provides a history of wage rates for the computer software exemption.

Outside Sales Exemption

A California employee qualifies for the outside sales exemption if the employee is:

  • Primary duty of making sales; or of obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer, and ...
  • Incumbent is 18 years of age or older.
  • Usually work away from the employer's place of business, selling tangible or intangible items.
  • More than 50% of the time they are performing these outside sales duties. Work under Wage Orders 4 (Professional, Technical, Clerical, Mechanical and Similar Occupations) or 7 (Mercantile Industry).
  • Receive commission-based compensation.

Commissioned Salespersons Exemption

A California employee qualifies for the commissioned salesperson exemption if the employee:

  • Is primarily engaged in sales.
  • Has earnings exceeding 1.5 times the California minimum wage.
  • Has more than 50 percent of his or her earnings representing commissions.
  • Work under Wage Orders 4 (Professional, Technical, Clerical, Mechanical and Similar Occupations) or 7 (Mercantile Industry).
  • Spends more than 50 percent of working time away from the employer’s place of business.

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