Exempt vs. Non-Exempt Employees

The Fair Labor Standards Act offers protections for workers who are non-exempt employees. California’s Labor Code offers additional protections to non-exempt employees within the state. It’s important to understand the differences between exempt and non-exempt employees, as the classification will directly affect your rights in the workplace. Unfortunately, it’s not uncommon for employers to misclassify employees to deny them of their entitlements.

Under the federal Fair Labor Standards Act or FLSA, employers must classify their employees as either exempt or non-exempt. This classification determines whether the employee will be paid for overtime work and if minimum wage laws will apply.

Federal law requires that employers pay non-exempt employees an overtime rate of 1.5 times their regular hourly wage for any work done over forty hours per week. In California, overtime pay must also be paid for:

• All hours worked over eight hours in a workday
• The first eight hours worked on the seventh consecutive day of work in a workweek

Under the California Labor Code, employers are also required to pay double the hourly rate for:

• All hours worked over 12 hours in a workday
• All hours worked over eight hours on the seventh consecutive day in a workweek.

Federal law requires that non-exempt employees be paid a minimum of $7.25 per hour. In California, the minimum wage is much higher, given the increased cost of living in this state:

• Californian employers with 25 or fewer employees must pay a minimum wage of $14.00 per hour.
• Californian employers with more than 25 employees must pay a minimum wage of $15.00 per hour.
• Within the city of San Francisco, the minimum wage is $15.59 per hour

Exempt employees earn a salary rather than an hourly wage, but this is not the only qualification to be an exempt employee. Generally, employees qualify as exempt if they meet the following requirements:

• Annual Earnings: Exempt employees must meet California’s minimum salary requirements. These requirements do not apply to teachers, certain sales employees, or those practicing law or medicine.
• Duties: The exempt classification typically only applies to professional roles that require a greater level of expertise.
• Independence: An exempt employee will have decision-making discretion and the authority to apply independent judgment.

Examples of exempt roles include:

• Executives: These individuals must manage the company or a department or division. To qualify, the employee must also be managing at least two full-time workers and have the authority to promote, hire, and fire employees.
• Professionals: They must perform work that requires advanced knowledge in a field of learning or science. These individuals have a high level of education and or training.
• Administrative Employees: Their duties must include non-manual or office work that’s related to the management of the business or its operations.
• Computer-Related Roles: They must work as computer programmers, computer analysts, software engineers, or another similar skilled role in the field. The Department of Labor outlines the duties that fall under this exemption.
• Outside Sales: Qualifying employees make sales or obtain contracts/orders on commission and regularly work away from the employer’s primary place of business.

If an employee is considered a highly-compensated employee, they are also exempt from FLSA rules if their job scope includes the executive, professional, or administrative duties listed above.

It’s important to note that an employee’s job title doesn’t automatically qualify them as exempt or non-exempt. Employees with administrative or executive titles, for example, commonly qualify as non-exempt employees. The job duties and earnings—not the job title—qualify workers as exempt vs. non-exempt employees.