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If you aren’t being paid overtime, or your employer is classifying you as exempt, and you want to know what is the difference between exempt and non exempt employees, we’ve put together a page to help you make sure you’re classified correctly.
What is Exempt Employee Misclassification?
You are required to work long hours. Your employer knows if you work more than 8 hours in a day or 40 hours in a week, they’ll have to pay you overtime. To avoid paying overtime, your company pays you a salary, and tells you that you are not entitled to overtime now.
Most employees believe that being paid a salary means you are not entitled to overtime. Exempt employee misclassification is the practice of treating non-exempt workers as exempt workers in order to deny an employee his or her overtime rights, meal break rights and rest break rights.
Exempt vs. Non-Exempt Employees
All California employees are non-exempt by default. However, if your employer can show that you meet a list of very strict requirements, it can treat you as exempt. That means they do not have to pay you overtime or provide you with meal breaks and rest breaks.
There are several types exempt positions under California overtime exemptions law:
- Executive Employees – Managers of two or more employees who have the authority to hire or fire other employees.
- Professional Employees – Workers who are licensed to work in law (attorneys), medicine, dentistry, optometry, architecture, engineering, teaching, or accounting, and limited other “artistic” professions.
- Administrative Employees – Workers engaged in management or general business operations in the areas of tax, finance, accounting, budgeting, auditing, insurance, quality control, purchasing, procurement, advertising, marketing, research, safety and health, personnel management, human resources, employee benefits, labor relations, public relations, government relations, computer network, internet and database administration, legal and regulatory compliance, and similar activities.
- Computer Software Employees – Highly skilled computer professionals involved in design, development, documentation, analysis, creation, testing or modification of computer systems or programs (excluding workers whose job does not involve in computer systems analysis, programming or similar computer-related jobs).
Can hourly employees be exempt?
While it is most common for hourly employees to be classified as non exempt, exempt employees can be paid by hourly wages.
What is the difference between exempt and non-exempt employees
Even if your job falls into one of the categories above for exempt professions, your employer still has to meet strict requirements before they can classify you as an exempt employee.
1. Salary Requirement
Your employer must pay you a salary that is at least two times the state minimum wage.
You must be paid a salary, which means if your employer pays you hourly, even if you make more than the amounts above, you are not exempt. A salary is a fixed amount that does not increase or decrease based on the amount of work (hours) or the quality of work you perform.
Salary Requirement for Computer Professionals
An exception to the salary requirement exists for computer professionals. Computer professionals can be paid hourly or by salary and still be exempt. In 2020, in order to be exempt, computer professionals must earn $46.55 per hour or an annual salary of at least $96,968.33.
2. Exercise of Discretion and Independent Judgment
Simply put, this means you are able to evaluate possible course of action/decisions, weighing the pros and the cons of each, and have the authority to make decisions on significant matters (e.g. company policy, large expenditures, etc.) after weighing the various possibilities.
3. Job Duties Requirement
Finally, exempt employees must perform what the law considers duties for exempt workers:
- Administrative Exemption – Must perform non-manual work, manage “back office” general business operations and have decision-making authority on significant matters. (Fact Sheet #17C: Exemption for Administrative Employees Under the Fair Labor Standards Act)
- Professional Exemption – Must perform intellectual tasks requiring advanced knowledge and specialized training in their field.
- Executive Exemption – Manage a team or department, supervising two or more employees and have the authority to hire, fire and discipline. “Managers” who do not have this type of authority are non-exempt.
Non-exempt positions that are commonly misclassified
An exempt employee misclassification lawyer will tell you, there are many misclassified workers. Some professions where misclassification is common are:
- IT workers
- Salespersons
- Healthcare workers
- Customer service workers
- Construction workers
- Tipped employees
Why do employers misclassify employees as exempt?
Employers generally misclassify employees as exempt and pay them a salary in order to deny workers their overtime rights, meal breaks rights and rest break rights. They figure if they can pay a lump sum amount, they can save money by not paying overtime.
Whatever your employer is ignorant of the law or whether they are intentionally violating it, you are still entitled to be paid overtime and compensated for missed meal and rest breaks.
Is it better to be exempt or non exempt?
Many times, exempt positions have a higher salary, but that doesn’t always translate into a better hourly rate.
If you’re being classified as an exempt employee and you work overtime – then your effective hourly rate is your paycheck divided by the total number of hours worked. Because you aren’t being paid overtime, your effective hourly rate decreases to less than the hourly rate equivalent of your salary.
However, if you’re classified as non-exempt and you work overtime, then your overtime hours are billed at 1.5x your regular hourly rate. This increased rate, when averaged with your regular hourly rate, actually increases your effective hourly rate.
How much money can you recover if you have been misclassified as an exempt employee?
Employees classified as exempt can recover tens of thousands or hundreds of thousands of dollars in unpaid overtime, penalties and interest. These numbers may seem high, but because California is so protective of its workers, the consequences for employers that misclassify their employees can be steep.
Employers who misclassify exempt employers commonly deny their employees:
- Minimum wage rights
- Overtime rights
- Meal break rights
- Rest break rights
Talk to an Exempt Employee Misclassification Lawyer
Not all attorneys are created equal. Do you want someone that aggressively fights for you, that chases every last nickel your employer stole from you and who does not give discounts? To have the best opportunity for success, you should hire an attorney experienced in exempt employee misclassification cases.
These cases require experience and skill. Going up against your employer can feel daunting, but not if you have the help of a knowledgeable attorney by your side. Let us help.
Our exempt employee misclassification lawyers are experienced in handling these types of cases.
Drew Lewis, PC, led by its lead trial attorney Drew Lewis, has years of experience representing employees who have been misclassified as exempt.
Drew has recovered millions of dollars for his clients. He understands how employers try to hide the facts and how to prove exempt misclassification cases. And he does not give discounts to employers who have stolen from their workers.
We offer a free case evaluation. And you do not pay us unless we win your case.