California’s Major Exemptions from Overtime Pay

“Exempt” in California workplace-speak commonly means an employee classified as exempt from overtime pay. Such workers may also be exempt from other rights and benefits accorded hourly workers, including provided meal and rest periods and “reporting time pay” (a minimum two hours of wages daily once on the job).

With criteria specified in California Industrial Welfare Commission (IWC) Wage Orders, the three most common exemptions are executive, administrative and professional. The concept is that such high-level overseers of organization and production are the most skilled and responsible for the success of the enterprise and thus can command appropriately higher pay for such expected results without regard to the time required.

All three types have the same “salary” basis requirement: a lump-sum wage equivalent to no less than two times the state minimum wage for full-time (40 hours per week) employment. For 2021, those minimums are: (a) for employers with 25 or fewer employees, salary no less than $1,040 per week, $4,507 per month, or $54,080 per year; and (b) for employers with 26 or more employees, salary no less than $1,120 per week, $4,853.33 per month, or 58,240 per year.

Each of these three exemptions have distinct so-called “exempt duties” as below. To qualify for exemption in a given seven-day workweek, the individual must be “primarily” engaged in such duties, i.e., at least 51% of his or her time during that period. However, a properly salaried individual engaged 51%-plus of a workweek’s time in exempt duties for any combination of the three (e.g., 30% time on executive, 21% administrative) will also be exempt from overtime, meal/rest periods, etc.

Executive Exempt Duties

• Has personnel managerial authority and responsibilities for the entire company or at least one of its departments or subdivisions, for example planning, recruiting, allocation of work priorities, coordination, documentation (e.g., statistics, performance evaluations) and production results;

• Customarily and regularly directs the work of two or more other employees;

• Has the authority (or provides substantial input) to hire or fire others;

• Customarily and regularly exercises discretion and independent judgment in such duties (versus merely applying one’s memory in following prescribed procedures).

Administrative Exempt Duties

• Has authority and responsibilities over performance of either ● office or non-manual work directly related to management policies or general business operations; or ● educational establishment administration or academic instruction; and

• Customarily and regularly exercises discretion and independent judgment (versus merely applying rote techniques/procedures, making decisions of little consequence or working in the production aspects of the business); and

• Carries out any one or more of the following:

1. Regularly and directly assists a proprietor or other senior executive who has delegated part of his/her discretionary powers to the employee;

2. Performs, under only general supervision, work along specialized or technical lines requiring special training, experience or knowledge (such as tax, insurance, and sales research experts, credit managers, purchasing agents, buyers, and personnel and safety directors); or

3. Executes, under only general supervision, special assignments and tasks (such as buyers, field representatives and location managers for motion picture companies).

Professional Exempt Duties, Qualifications

• Engaged in the licensed practice of law, medicine, dentistry, optometry, architecture, engineering, teaching or accounting; or

• Engaged in an occupation commonly recognized as a “learned or artistic profession”;

• Customarily and regularly exercises discretion and independent judgment in his/her position.

California provides overtime exemption for workers meeting other detailed duties and compensation requirements, including certain physicians, computer programmers and truck drivers. The Department of Labor Standards Enforcement (DLSE) provides a comparison chart.

See also:

• What’s New in 2021: California Minimum Wage Increases (December 23, 2020)

For more information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Cindy Bamforth
April 22, 2021