CAUTION - Before you proceed, please note: By clicking “accept” you agree that our review of the information contained in your e-mail and any attachments will not create an attorney-client relationship, and will not prevent any lawyer in our firm from representing a party in any matter where that information is relevant, even if you submitted the information in good faith to retain us. This website and its content are not intended to be relied on as legal advice, and should not be relied on as such. Co. (2005) 131 Cal.App.4th 260, 267 [“It is undisputed that the combined effect of these provisions of federal law is to preclude employers from docking the pay of an employee for an absence of less than a day (a partial-day absence). Code of Regs., tit. To qualify for this exemption, the following requirements must be met: Commissions are wage payments that an employee is entitled to as a result of sales they make. According to the new exempt employee law that went into effect January 1, 2020, all executive, administrative, professional, computer, and outside sales exemptions … Any work in excess of eight hours in one workday and any work in excess of 40 hours in any one workweek and the first eight hours worked on the seventh day of work in any one workweek shall be compensated at the rate of no less than one and one-half times the regular rate of pay for an employee.”]; see also Labor Code, §§ 511, 514, 515.↥, Labor Code, § 510, subd. (a) [requiring employees to “customarily and regularly exercises discretion and independent judgment in performing” the duties of their job].↥, Labor Code, § 510, subd. Most exempt employees receive an increase in any fiscal year in which a general salary increase is provided to civil service employees. For a summary of other significant changes in store for California employers in the new year, see our advisory here. (a)(2)(A)–(C).↥, Labor Code, § 515.5, subd. 8, § 11040, subd. In general, an employee is only exempt if they are paid on a salary basis (rather than an hourly wage).⁠30 The salary must be at least at least twice the state minimum wage for full-time employment.⁠31, A salary, for these purposes, is an unvarying minimum amount of pay.⁠32 The employee’s pay must be predetermined, and cannot change based on the number of hours worked or the quality of the work performed.⁠33, Courts have suggested that employers can deduct from an employee’s pay for full-day absences and still consider the employee to be paid on a salary basis.⁠34 But the employee would no longer be considered “salaried” if the employer deducted for partial-day absences.⁠35, If the employee’s pay is based on the number of hours worked with no minimum guarantee, the employee will be treated as being an hourly employee (an thus nonexempt).⁠36, As mentioned above, California law requires exempt employees to be paid a monthly salary of at least twice the state minimum wage for full-time employment to qualify as exempt. 13, § 1200, et seq. only. Employers with employees in states other than California should review their compensation levels for their exempt employees and implement any changes necessary to comply with the changing federal requirements by January 1, 2020. 3.↥, See, e.g., Cal. Feb.20.2020; Wage & Hour; What is a California Exempt Employee? (a); Cal. As of January 1, 2020, the FLSA stipulates that employees in the above categories are exempt if they are paid by salary as opposed to hourly and if … Code of Regs., tit. Code of Regs., tit. Prior results do not guarantee a similar outcome. This standard strongly favors the employee, and the employer has the legal burden of proving an exemption.⁠92 When employers fail to properly treat their employees as nonexempt, the consequences can be severe. Federal law extends that time to three years if the misclassification was willful.⁠116, Labor Code, § 515, subd. This website contains "communications" within the meaning of rules 7.1–7.3 of the California Rules of Professional Conduct. Occupations to which special overtimes rules apply include: California courts narrowly construe the exemptions explained above. The minimum wage in California for 2020 is $13 per hour. 3.↥, Cal. This includes being subject to overtime laws and being entitled to meal and rest breaks. (a); Cal. Code of Regs., tit. One may claim exempt from 2020 federal tax withholding if they BOTH: had no federal income tax liability in 2019 and you expect to have no federal income tax liability in 2020. The more common exemptions are discussed below. ; see also Collins v. Overnite Transp. (a) [statute of limitations: “Within one year: (a) An action upon a statute for a penalty or forfeiture, if the action is given to an individual, or to an individual and the state, except if the statute imposing it prescribes a different limitation.”].↥, Pineda v. Bank of America, N.A. The employee may only earn one extra hour per workday for their employer’s failure to provide them with missed meal breaks.⁠17, There are some types of exemptions that apply to meal breaks.⁠18 But the main exemptions discussed in this article (namely, those that apply to executive, administrative, and professional employees) do not apply to meal breaks.⁠19, Nonexempt employees in California are also entitled to take a paid 10-minute rest period during the middle of each 4-hour work period.⁠20, Employees are not entitled to a rest period if they work less than 3.5 hours in the work day.⁠21, When employers fail to provide an employee a rest period, they are required to pay the employee an extra one hour of pay at the employee’s regular hourly rate. If they do, then the involved employees do not meet the salary basis test, and are nonexempt for purposes of overtime pay.”].↥, Negri v. Koning & Associates (2013) 216 Cal.App.4th 392, 400.↥, 29 C.F.R. 8, §§ 11010⁠–⁠11170, subds. (a); Cal. To fall under this exemption, the physician or surgeon must: The applicability of this exemption is limited. Computer professionals must meet all legal requirements to be considered exempt. In most cases, there are three simple requirements to determine whether a worker is an exempt employee under California law: If all three requirements are met, the employee will usually be classified as “exempt” from overtime, minimum wage, and rest break requirements (but not meal break requirements). Resolve their dispute informally with their employer. (e) [“For the purposes of this section, ‘primarily’ means more than one-half of the employee’s worktime.”].↥, Labor Code, § 515, subd. Proc., § 338, subd. The rest of this article explains these requirements in greater detail, as well as what happens when employers fail to property classify their employees under California Law. Simply paying an employee a salary does not make them exempt, nor does it change any requirements for compliance with wage and hour laws. (a), 516, subd. Therefore, as of January 1, 2020, to qualify as an exempt employee, the employee must receive an annual salary of at least $54,080 for large employers and $49,920 for small employers. and takes his cases through Melmed Law Group P.C. In a memo issued on October 29, the California Department of Industrial Relations (DIR) increased the compensation threshold for exempt computer professionals by 2.5% over the 2019 rates. 8, § 11050, subd. 13, § 1200, et seq.↥, See Cal. If the salary requirements are met, the next question is whether the employee is employed in an administrative, executive, or professional capacity.⁠42 This is sometimes called the “white collar duties” test. There are three types of professional employees that can qualify for exemptions: The professional employee exemption is fact-specific and depends on the nature of the work that the employee primarily undertakes. Minimum Wage for Employers With 26 or More Employees, Minimum Wage for Employers With 25 or Fewer Employees, New Minimum Wage Effective January 1, 2020. For a PDF version of this chart, click here. * Special minimum wage rates often apply to hotel employees and non-profit employees, which the above tables do not capture. To be considered "exempt," employees must generally satisfy all three of the following tests: Salary-level test: Employees must earn a weekly salary that meets the minimum requirements. Code of Regs., tit. Guide to California’s Minimum Wage Laws in 2020 and Beyond. This means that the minimum salary for exempt employees in 2020 is either: $4,160.00 per month (or $49,920.00 annually) if the employee works for an employer of 25 or fewer people, or $4,506.67 per month (or $54,080.00 annually) if the employee works for … As mentioned above, there are usually three simple requirements to determine whether a worker is an exempt employee under California law: In addition to this three-part test, there are several types of exemptions that apply to specific jobs. Effective on January 1, 2020, an employer who fails to pay within 30 days after the due date the costs and fees necessary for arbitration to begin or continue will be in material breach and default of the arbitration agreement and will waive its right to compel arbitration. An exempt employee is someone whose job is not subject to one or more sets of wage and hour laws. 8, §§ 11010⁠–⁠11150, subds. Co. (2003) 105 Cal.App.4th 171, 175.↥, Cal. 8, §§ 11010⁠–⁠11150, subds. Co. (2005) 131 Cal.App.4th 260, 267; 29 C.F.R. 8, § 11040.↥, Negri v. Koning & Associates (2013) 216 Cal.App.4th 392, 395; Kettenring v. Los Angeles Unified School Dist. (11)(B).↥, Labor Code, § 226.7, subd. ALL RIGHTS RESERVED. Break time for an employee that does not run concurrently with the rest time authorized for the employee by the applicable wage order of the Industrial Welfare Commission shall be unpaid.”].↥, See 29 U.S.C § 213 [federal exemptions]; Cal. Non-exempt employees, however, are protected by California wage and hour laws. They do not need not be paid to the extent that they last longer than, or are in addition to, the regular rest period.⁠24, Determining Whether an Employee is Exempt, Certain employees are exempt from California and federal laws governing minimum wage, overtime, work hours, and rest periods.⁠25. The 2020 DI/PFL maximum weekly benefit amount is $1,300. Non-Exempt Employees. Code of Regs., tit. [Citations.] 8, § 11050, subd. Code of Regs., tit. Mandatory Vacation Time: California employers are not required to give vacation time. 453, 456] [“We have held that [FLSA] exemptions are to be narrowly construed against the employers seeking to assert them and their application limited to those establishments plainly and unmistakably within their terms and spirit.”].↥, Labor Code, § 515, subd. However, employees can exercise discretion and independent judgment even if their decisions or recommendations are reviewed at a higher level.”].↥, Cal. (a) [“Eight hours of labor constitutes a day’s work. Our consultations are free and confidential. Since 2017, California has been working its way up to an eventual $15 minimum wage. Thus, in order to maintain their exempt status, commissioned inside salespeople will need to earn more than $19.50 per hour (26 or more employees) or $18.00 per hour (1-25 employees), whichever rate is applicable. Code of Regs., tit. It’s usually a good idea to get the opinion of a lawyer before deciding how to proceed. .”].↥, Cuadra v. Millan (1998) 17 Cal.4th 855, 859.↥, See Code Civ. The employee may only earn one extra hour per workday for their employer’s failure to provide them with missed rest period.⁠22, Employers must also provide reasonable breaks must also be provided to lactating mothers who want to express breast milk for their children.⁠23, Lactation breaks must be paid if they are taken during the employee’s regular rest period. §§ 395.1⁠–⁠395.13; Cal. & Prof. Code, § 17203; Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 178 [“[A]n order that a business pay to an employee wages unlawfully withheld is consistent with the legislative intent underlying the authorization in section 17203 for orders necessary to restore to a person in interest money or property acquired by means of an unfair business practice.”].↥. To take advantage of this longer statute of limitations, the employee must be filing their claim based on a breach of a written contract.⁠113, Alternatively, the employee might be able to claim the failure to pay their wages was an unlawful business practice under California’s Unfair Competition Law.⁠114 This is sometimes another way for an employee to access a four-year statute of limitations, but the remedies can be limited.⁠115, Employees can usually seek back pay for overtime wages earned during the two years prior to making a wage claim. Any employer who has even one employee must have workers’ compensation insurance. Code of Regs., tit. (a) [“Eight hours of labor constitutes a day’s work. Los Angeles (City and Unincorporated Areas of County), They perform exempt duties more than 50% of their work time, and. There are, however, many caveats to this test. (1)(C).↥, Cal. . Contacting any attorneys or law firm mentioned on this website, without more, does not create an attorney-client relationship. . The 2020 SDI withholding rate is 1.0 percent (.01). Code of Regs., tit. (e)(1) [“An employee suffering injury as a result of a knowing and intentional failure by an employer to comply with subdivision (a) is entitled to recover the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not to exceed an aggregate penalty of four thousand dollars ($4,000), and is entitled to an award of costs and reasonable attorney’s fees.”].↥, Labor Code, § 203, subd. Licensed physicians and surgeons are sometimes exempt for the purposes of overtime compensation. The most common job-specific exemptions apply to: These job-specific exemptions have their own tests (distinct from the three-part test mentioned above). .”].↥, See Bus. California employers should take note of the following changes to state and local minimum wage laws, set to take effect on January 1, 2020, and will impact both nonexempt and exempt employees. San Francisco (Opens in new window), for example, has established a $15.59 per hour minimum wage for businesses within the city’s geographical boundaries.⁠7, Federal law requires employers to pay nonexempt employees an overtime rate of at least one-and-one-half times their regular hourly wage for each hour worked in excess of 40 during a workweek.⁠8, Again, California law protects nonexempt employees to a greater degree than federal law.⁠9. Of note, registered nurses who are employed to engage in the practice of nursing are not exempt professionals, but they might still be exempt as administrators or executives.⁠55, The Discretion and Independent Judgment Requirement, To qualify as an exempt employee, California’s Labor Code requires the worker to regularly exercise discretion and independent judgment in performing their duties.⁠56, An employee exercises discretion and independent judgment when the employee makes and implements important choices after considering competing courses of action.⁠57, An employee’s judgment is independent when it is free from immediate direction or supervision, even if an employee who is higher in the management chain has the authority to override the decision.⁠58. Certain employees are “nonexempt” under California law. Attorney Advertising. Code of Regs., tit. As mentioned above, where a local minimum wage rate exceeds the state minimum wage rate, employers must comply with the local rate. Code Regs., tit. (c); Cal. Examples of duties that relate to management or general business operations include responsibility for marketing, research, budgeting, finance, accounting, purchasing, quality control, human resources, labor or government relations, regulatory compliance, and database administration.⁠48. (a); see McLean v. State of California (2016) 1 Cal.5th 615, 619 [“An ’employer’ that ‘willfully fails to pay’ in accordance with sections 201 and 202 ‘any wages of an employee who is discharged or who quits’ is subject to so-called waiting-time penalties of up to 30 days’ wages.”].↥, See Reynolds v. Bement (2005) 36 Cal.4th 1075, 1084 [“The employee may seek judicial relief by filing an ordinary civil action against the employer for breach of contract and/or for the wages prescribed by statute. This means that the minimum salary for exempt employees in 2020 is either: These numbers are calculated by doubling the applicable minimum wage, multiplying that amount by 40 hours per week, the result of which is then multiplied by 52 weeks and divided by 12 months. Code of Regs., tit. For individuals to qualify as exempt employees, California requires that: Accordingly, effective January 1, 2020, the minimum salary threshold for these exemptions is as follows: California’s increased minimum wage will also impact commissioned inside salespeople. 1(D).↥, Nordquist v. McGraw-Hill Broadcasting Co. (1995) 32 Cal.App.4th 555, 562 [“Exemptions are narrowly construed against the employer and their application is limited to those employees plainly and unmistakably within their terms.”].↥, Ramirez v. Yosemite Water Co., Inc. (1999) 20 Cal.4th 785, 794⁠–⁠795 [“[T]he assertion of an exemption from the overtime laws is considered to be an affirmative defense, and therefore the employer bears the burden of proving the *795 employee’s exemption.”].↥, Labor Code, §§ 204, 510, subd. The new rule is set to take effect on January 1, 2020 and increase the number of overtime-eligible employees by 1.3 million. In a commission-based arrangement, the size of the employee’s compensation depends on the amount or value of the thing that was sold.⁠60, A discretionary payment that an employer can choose to pay or withhold, such as a performance bonus, is not a commission even if it is computed as a percentage of sales or profits.⁠61. Code of Regs., tit. Employees who are paid on a commission basis are sometimes exempt from California’s overtime pay laws. 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