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Exemptions

Executive Exemption
Administrative Exemption
Professional Exemption
Computer Professional
Court

Overtime Law in California

This page will cover the basics of overtime law in California for most types of work. I am not able to cover every issue of employment law here.  I encourage you to call or email my office if you have particular questions.  There is never a fee for an initial consultation.

Nothing in the foregoing discussion is meant to be legal advice and does not serve to establish an attorney-client relationship.  If you do have a claim, the results of your case will depend on your particular circumstances. In addition, any samples that are given are for illustration purposes only and would not necessarily represent your claim.  Any statements, on this page or elsewhere, are not guarantees of any outcome.

 
Who is Entitled or Overtime?

In California, everyone is entitled to overtime pay, unless they meet one or more of the narrowly defined exemptions.  The exceptions to overtime pay are called “exemptions” because if you meet the qualification, you will be “exempt” from overtime pay.  Thus, the legal terminology is that exempt means no overtime, and non-exempt means you get overtime. 

The major exemptions are: Executive, Administrative, Professional, and the Computer Professional Exemptions.  If you don’t meet all of the requirements for at least one of these exemptions then you are entitled to overtime pay. There are also specialty exemptions for more esoteric types of work such as sheepherders, irrigators, and carnival workers, but I will not cover these here.  

Who Must Prove the Exemption?

In 1947, the Supreme Court decided the case of Walling v. General Industries Co., in which it held that the employer must prove every point of an exemption in order for it to apply. 

This concept causes problems for some people because, in any lawsuit, the plaintiff (the one bringing the lawsuit) always carries the burden of proof. However, it is best to think of exemptions as "affirmative defenses." These type of defenses mean that once the plaintiff has established a basic claim, the plaintiff will win unless the defendant can prove a defense. A common example in criminal trials is "not guilty by reason of insanity." If the defense raises the issue, then the defense must prove it. It is the same for exemptions. If the defense (the employer) raises an exemption, the employer must prove it.

If the Exemption Doesn't Fit, the Employer Must Remit

Your employer can not mix and match exemptions.  That is, if you only meet 50% of the requirements for one exemption and 50% of the requirements for a different exemption, you are entitled to overtime.  In addition, you must meet all of the requirements.  It is not enough that you very strongly meet most of the requirements.  If there is just one little requirement that you don’t meet, you don’t fit under that exemption.

However, there is no requirement that you meet anything more than 100% of any one of the exemptions.  That is, if you meet all of the requirements for just one exemption, you are not entitled to overtime pay.

There is sometimes confusion by something called the "combination exemption." The "combination exemption" allows time spent that meets 100% of the qualifications for one exemption to be added to time spent that meets 100% of the qualifications for another exemption to be added together to determine whether you spend more than 50% of your time on exempt duties. It never allows the employer to mix-and-match requirements for exemptions.

Exemptions

Executive Exemption

 In order to be exempt from California overtime pay under the Executive Exemption, you must be a bona-fide “executive.”  In order be considered an “executive” you must be paid a salary of at least two times the state minimum wage for full time work and:

  1. Manage the entire enterprise in which you work or a customarily recognized department or subdivision.
  2. Direct the work of at least 2 subordinates in your department.  
  3. Have authority to hire or fire – directly or indirectly.
  4. Exercise independent business judgment.
  5. Spend more than 50% of your time doing the above.

In addition, California workers are protected by federal law, which, as of December 1, 2016, had a minimum salary of $913/week. However, see this article of issues if the federal regulations on the salary level.

The executive exemption is sometimes incorrectly called the “supervisors” exemption.  It is important to know that there is no “supervisors” exemption.  You can supervise people and still be entitled to overtime.

Many people see requirement #2 and think that if you supervise 2 people, you are exempt.  This is simply not the case.  First of all, if you only supervised 2 people, it is extremely unlikely that you would spend 50% of your time supervising them. More than likely, you will be considered a “working foreman” and would be entitled to overtime.

In addition, the most important item above is that you must be an executive in charge of a real department or subdivision of the enterprise.  Jobs such as “Team Lead”, “Development Manager”, and “Project Manager” are likely not in charge of a fixed department.  The DLSE enforcement manually aptly puts the challenge of this exemption in that an “employee must be in charge of the unit, not simply participate in the management of the unit.” This is why most low and mid level managers are improperly classified under this exemption. If you were told you were not entitled to overtime because you are a "manager," you can email me with a brief description of your job duties and I can tell you whether or not this exemption might apply to you.

To meet requirement #3, you must be able to do the following: hire or fire, AND review performance. You do not need to be the one that actually performs the hiring or firing, but your opinion must be given strong preference. If a voting system is used, and you only get one vote like everyone else, then your opinion is not being given strong preference and you don't meet the exemption. You do not need to both hire and fire, participating in either one will be sufficient. However, you must take part in performance reviews or other activities which relate to the advancement of employees.

In terms of requirement #5, please see this page on the Executive Exemption which discusses it in more detail.

Remember that job titles are not used in determining exemption from overtime.  Just because you company prints “Director of XXX” or “Vice President of YYY” on you business card does not make you exempt.  If you spend 50% of your time doing the same type of work as your subordinates, it doesn't matter what your title is, you are probably entitled to overtime.

Administrative Exemption

The administrative exemption is fairly straight forward to explain, but it ends up being a bit tricky in practice.  A common way to explain it is that workers in a company are classified as either administrative or production.  The classification is fairly straight forward for most employees.  Production work is anything that relates to the end products or services that your company provides.  Administrative work is anything that relates to supporting the business itself.  Examples of administrative work include accounting, human resources, tax, and legal.

Production work is easy to understand in the case of companies like General Motors.  General Motors produces cars.  If you are working at GM producing cars, you are doing production work.  Companies like Microsoft and Oracle produce software.  If you write software that these companies produce, you are doing production work. Other cases are not as simple. For instance, you might work at Microsoft, but write software that calculates how much money Bill Gates is making each minute of the day.  Such software is not produced and sold by Microsoft, but is instead used to help Bill run the business.  Writing this software would be considered “administrative” – however, you would likely still get overtime because you would not be exercising business judgment over matters of substantial importance.

In cases where the company provides a service, the service is considered the “product” made by the company.  For instance, courts have held that a County Probation Department “produces” the monitoring of convicted persons who are on probation.  Since a probation officer directly works by monitoring people on probation, she is involved in production work and entitled to overtime.

Another example of an intangible “product” that courts have found is a newscast. The court held that a newscast was the product of the TV station and that the producers, directors, and reporters on the newscast were doing production work and thus entitled to overtime.

There have not been a large number of cases in the computer industry to specify exactly where the boundary line for the Administrative Exemption lies. However, the rules are supposed to be construed strictly in favor of the employee.

Business Judgment Over Matters of Substantial Importance

In addition to working on the administrative side, you must also exercise business discretion over matters of substantial importance before you can be exempt from overtime.  The technical terms commonly used for this is “discretion and independent judgment” on matters “directly related to management policies or general business operations” that are “decisions in significant matters.” 

For simplicity, many people say that this exemption requires “discretion and independent judgment.” This is simply a misstatement used to reduce the requirements of this exemption.  If you can decide to work on a task today rather than tomorrow, you are exercising discretion and independent judgment. You are exercising discretion in that you could choose today or tomorrow to work on the task.  You are exercising independent judgment in that you boss will not care which one you choose, as long as you get it done.  However, this is not what the exemption requires.  Obviously, whether you do the task today or tomorrow makes little or no difference.  Thus, it is not a “significant matter.” In addition, it has nothing to do with the “management policies or general business operations” of the company.     

The most common place that employers try to apply the administrative exemption is in IT departments such as the help desk, network admin, or server management.  While these departments are considered part of administration as opposed to production in most companies, the problem is that most employees in these departments do not exercise business judgment – instead they use technical skill. 

To illustrate the difference, consider the following:

You are an IT Manager who is deciding what type of firewalls will best protect your internal network. This is a business decision and you would likely be exempt provided that you spent more than 50% of your time on similar such tasks.

On the other hand, you are a network admin and you boss tells you to install a new PIX firewall and block all incoming traffic except for authenticated web clients of the sales department.  While this task would require a great deal of skill and knowledge of the PIX firewall and how to set it up, you would not be exercising any business judgment.

On the software development side, if you are a systems analyst and you meet with users to determine what they need from software and write up a requirements document that describes the software that will be developed for the company, you are making important decisions about the companies internal business systems and would likely meet this exemption.

On the other hand, if you are a programmer, and the systems analyst hands you a spec and you write the software for it, you would be exercising skill rather than business judgment and would be entitled to overtime as long as you don’t fall under one of the other exemptions.

The Administrative Exemption is by far the most difficult to deal with. Fortunately, for many computer programmers, it is very clear cut that the exemption does not apply. However, for people who spend most of their time managing the software process rather than writing code, this exemption could apply. For IT workers in the help desk and networking groups, this exemption is not as clear cut.

In almost every case for overtime, the company will defend with the Administrative Exemption. You need an attorney who knows how technology companies work and can clearly and simply explain to a jury that the work that you performed did not qualify for this exemption. This exemption can be confusing, so if you have any questions, please email or call me and I will be happy to go over it with you.

 

Professional Exemption

The professional exemption has a very strict meaning.  I am sure that you act professionally in your job and may even consider yourself a professional.  However, the legal meaning of the Professional Exemption has nothing to do with this.  In order to meet the Professional Exemption you must:

  1. Be licensed by the State of California in an area such as law, medicine, engineering, accounting, etc. and working in that field  OR
  2. Have an advanced degree (This means a specialized Bachelors Degree or higher -- Masters, MBA, PhD, etc.) and perform work that is intellectual and varied. OR
  3. Work in a recognized field of artistic endeavor. (Actors, screen writers, artists, but not technical writers, cartoonists, or industrial artists.)
  4. AND exercise discretion and independent judgment in the above areas.
  5. AND be paid a basic minimum salary.

This exemption is usually pretty clear cut, but it does have two sides to it: the artistic and the learned.

In order to qualify as any type of artist, you must be given no more than the subject matter of your work. That is, if you are told the details of what to draw or write, you will not be exempt. As such, highly skilled artist that work as cartoonists, computer animators, or industrial artists are all entitled to overtime. 

Most people who qualify for the learned side of the exemption hold some type of license to practice -- that is, doctors, lawyers, CPAs, professional engineers, etc. In general, computer programmers do not qualify as professionals under this exemption as there is no requirement for any type of degree in order to enter the profession.

The State of California does not license computer programmers or IT workers, so there is no way that #1 can be met. If you do not have a specialized degree in something like Computer Science, there is no way that #2 can be met.  If you do have a specialized degree, the position that you work in must require it.  That is, if some people in the company do the same job and don’t have a specialized degree, then the position probably does not require it. In addition, your degree must be directly related to the work that you do.  A Masters in Art History will not exempt you as a computer programmer.   If you are doing post graduate research for JPL, you probably qualify for this exemption, but if you are doing normal programming and IT functions you, these task usually do not require an advanced degree. A general requirement that you possess a 4 year education or some type of Bachelors Degree will also not be sufficient. The requirement is that the degree be specifically related to your work. A degree in computer science would be related to computer programming, but a biology degree would probably not.

Computer Professional Exemption

The Computer Professional Exemption has recently been amended by the California Legislature. As a result, I have moved a complete discussion of it to its own page which can be found here.

If you have questions about how any of the above exemption might typically by applied, you can email me a job description to find out whether that position might be entitled to overtime.

 

Overtime Updates
January 2017: New minimum wage laws and overtime exemptions
December 2016: New federal regulations for overtime create confusing issues for California workers
New Computer Professional Law wage increase Jan 01, 2015
August 2013: Unpaid internships are illegal.
April 2013: California's executive exemption defined.
California Labor and Employment Law Blog
Meal Break violations can extend back four years
Information Technology (IT) overtime.
VIDEO LINK: Michael Tracy discusses Liquidated Damages for Overtime (QuickTime 6MB)
©2016 Michael Tracy

This website only provides general information about the overtime laws in California and is not meant to be legal advice and does not serve to establish an attorney-client relationship. Please note that labor laws are constantly changing and being interpreted by the courts and you should consult with an attorney to ensure that you have the most up-to-date information. Any statements, on this page or elsewhere, are not guarantees of any outcome. Michael Tracy is a licensed attorney only in California.