More often than not, many assume that because they are salaried, they are not entitled to overtime. Because it is highly litigated, understanding the distinction between exempt and nonexempt employees is critical. Generally, exempt employees are your key personnel who possess management and decision-making responsibilities.
Always assume employees are nonexempt unless they clearly meet the job duties of an exempt position and will earn at least two times the current minimum wage on a monthly basis. I
An exempt employee is normally an executive, administrative or professional employee. Other exempt employee types include some inside and outside salespeople. All other employees generally fall under the nonexempt category. All nonexempt employees are covered by the state and federal wage and hour laws. To avoid paying overtime premiums, an employee must be exempt from the overtime requirements of both state and federal law.
Job Title Irrelevant to Employee Status
Job titles alone do not designate an employee as exempt or nonexempt. An employee with an impressive job title may not qualify as an exempt employee if his/her actual duties do not meet the exemption requirements. An employee who performs routine bookkeeping tasks does not become an exempt employee when given the title “controller” rather than “bookkeeper.” Giving an employee the title of “store manager” does not make him/her exempt if he/she opens or closes the store alone, serves customers, maintains merchandise displays and performs the work of a retail clerk.
Salary Requirements for Exempt Employees
Exempt employees generally must earn a minimum monthly salary of no less than two times the state minimum wage for full-time employment, and the salary must be a pre-determined sum. There are different rules for some employees, such as physicians, computer professionals and outside salespersons. However, placing an employee on a salary does not exempt that employee from wage and hour laws. A nonexempt employee placed on a “salary” earns overtime just as hourly wage earners do.
The following topics describe some of the more important issues you should consider regarding an exempt employee’s salary.
Minimum Salary for Exempt Employees
The minimum monthly salary for most exempt executive, administrative and professional employees is no less than two times the state minimum wage for full-time employment — $3,466.67 per month effective January 1, 2016. To calculate this amount, multiply the state minimum wage by the number of hours a full-time employee works in one year. Divide the result by 12 months.
The California minimum wage rate increased to $10 per hour effective January 1, 2016. The exemptminimum salary requirement is based on the current state minimum wage, not any applicable local minimum wage
The minimum salary calculation is:
- California minimum wage = $10.00/hour
- Number of hours a full-time employee works in a week = 40
- Number of weeks in a year = 52
- Number of hours a full-time employee works in a year = 40 x 52 = 2,080
- Minimum annual salary for a full-time exempt employee beginning January 1, 2016 = $10.00 x 2 = $20 x 2,080 = $41,600
- Minimum monthly salary for a full-time exempt employee beginning January 1, 2016 = $41,600 ÷ 12 = $3,466.67