Misclassification of Non-Exempt Employees as Exempt in California

In California, non-exempt employees are ones who must be paid on a wage and hourly basis because their job duties do not fall within an overtime exemption. It is not uncommon for some workers to get misclassified as exempt when they should be non-exempt. These workers may be able to sue their employer for unpaid wages, as well as interest, damages, and attorney’s fees.

Below, our California labor and employment law attorneys discuss the following frequently asked questions about misclassified non-exempt employees in California:

• 1. What if my employer misclassifies me as an exempt employee in California?
• 2. What is the difference between exempt and non-exempt?
• 3. Why would my employer intentionally misclassify me as exempt?
• 4. What are some signs that an employee is misclassified as exempt?
• 5. Can I be fired for complaining about misclassification?
• 6. Can I sue my employer for misclassification?

If you have further questions after reading this article, we invite you to contact us at Shouse Law Group.

1. What if my employer misclassifies me as an exempt employee in California?

Under California employment law, employees are generally classified as exempt or non-exempt. Non-exempt employees are eligible for overtime, rest and meal breaks, and are subject to California’s minimum wage laws.¹

Exempt employees may not be eligible for overtime or breaks. However, exempt employees must be paid at twice the minimum hourly wage based on a 40-hour workweek.²

As an exempt employee, an employer could require the employee to work more than 40-hours per week without overtime pay. An employer would also not have to provide rest breaks and meal breaks to an exempt employee. An employer may intentionally or unintentionally classify a non-exempt employee as an exempt employee.

If an employer wrongly classifies a non-exempt employee as exempt, the employer may owe the employee for unpaid wages. This may include damages for:

• Unpaid overtime
• Rest breaks never provided
• Meal breaks never provided
• Liquidated damages (double damages)
• Interest
• Attorney’s fees
• Court costs

2. What is the difference between exempt and non-exempt?

The difference between an exempt employee and non-exempt employee is that some employees are not subject to state and federal labor laws, including overtime, rest breaks, and meal breaks.

Exempt Employees

The largest group of exempt employees includes executive, administrative, and professional employees. This is known as the so-called “white-collar exemption.”³ Other exempt workers may include:

• Independent contractors
• Outside salespersons
• Some computer professionals⁴

Exemption status is not based on job title alone. A job title with “executive” or “administrative” or “professional” does not necessarily mean that the job qualifies for an exemption.⁵

Similarly, just because an employee is paid a regular salary does not automatically make them exempt from California labor laws.

In order to be considered an exempt employee, workers have to meet certain requirements. Executive, administrative, and professional workers have to qualify based on duties and salary requirements. In California, the employee must meet the following tests:

1. Be primarily engaged in executive, administrative or professional duties (generally, this requires the employee dedicate about 50% or more of his or her work time to these duties);
2. Regularly and customarily exercise discretion and independent judgment on the job; and
3. Earn a salary equivalent to at least twice the state minimum wage for full-time work (based on a 40-hour workweek).⁶

As of January 1, 2024 the minimum annual salary to qualify for an exempt employee would be $66,560 (double the state minimum wage of $16.00/hour).⁷

Non-Exempt Employees

Non-exempt employees include all other employees who do not meet the requirements for exemption. As a non-exempt employee, workers are protected by federal and California labor laws. This includes minimum wage laws, required rest periods, meal breaks, and overtime pay.

Overtime Pay

Under California labor laws, non-exempt employees who are not part of an alternative workweek schedule earn overtime if they work more than:

• eight (8) hours in a single workday,
• forty (40) hours in a single workweek, or
• six (6) days in a single workweek.⁸

Overtime pay generally consists of time and a half–that is, one and a half the worker’s regular hourly rate of pay. However, an employee is paid double the regular hourly pay rate for

• any work in excess of twelve (12) hours in a single workday, and
• any work in excess of eight (8) hours on the seventh day of a workweek.⁹

Minimum Wage Laws

In 2024, the statewide minimum wage in California is $16.00 per hour. However, in some cities and counties, the minimum wage may be higher than the California minimum wage.¹⁰

The California minimum wage is set to continue to increase every year between 2017 and 2024, based on the following schedule:¹¹

 

Year	California Minimum Wage for Employers with 26 or more employees	California Minimum Wage for Employers with 25 or fewer employees
2017	$10.50/hour	$10.00/hour
2018	$11.00/hour	$10.50/hour
2019	$12.00/hour	$11.00/hour
2020	$13.00/hour	$12.00/hour
2021	$14.00/hour	$13.00/hour
2022	$15.00/hour	$14.00/hour
2023	$15.50/hour	$15.50/hour
2024	$16.00/hour	$16.00/hour

Rest and Meal Breaks

The California Labor Code requires meal breaks and rest breaks during the workday, based on the number of hours worked.

During the workday, non-exempt employees are entitled to rest periods and meal breaks. Rest breaks must be at least ten (10) minutes for each four (4) hours of work. Rest breaks must be counted as time worked and paid by the employer.¹²

Employees who work more than five (5) hours in a day are also entitled to a thirty (30) minute meal break. However, an employee may agree to waive that meal break if the employee does not work more than six (6) hours in the day. Employees who are working more than ten (10) hours in a day must also be given a second thirty (30) minute meal break. ¹³

3. Why would my employer intentionally misclassify me as exempt?

Some employers intentionally misclassify employees as “exempt” in violation of California labor law and the Fair Labor Standards Act (FLSA).

Intentional misclassification as an exempt employee is generally based on an employer’s financial motives. However, because of the penalties involved with misclassifying employees, an employer may ultimately pay more if they are caught violating labor laws.

Employers may misclassify a non-exempt employee as an exempt employee for the following reasons:

• The employer can have an employee work more than 8-hours a day or 40-hours in a workweek without paying overtime.
• The employer does not have to provide a lunch break.
• The employer can require the employee to be on the job during their work break.
• The employer does not have to provide for regular rest breaks.
• The employer does not have to track employee hours

4. What are some signs that an employee is misclassified as exempt?

The requirements for exempt status may be unclear for employees. An employee may be unsure whether they are exempt or non-exempt. There are some indications that an employee is misclassified as exempt.

Hourly Pay Rate

Exempt employees are generally not paid on an hourly basis. Most exempt employees are paid a regular salary that is not directly tied to hours worked or production. If an employer regularly deducts wages from an employee when they miss a few hours of work, the employee may be misclassified as exempt.

Example: Ray is an executive administrator who is paid a salary of $2,000 per week. Ray gets permission from his employer to take half days on Fridays to take a college course. However, Ray’s employer deducts about one-tenth (1/10th) of his salary, which is reduced to $1,800 for the weeks Ray takes a half day. Ray’s salary reduction may be a sign that his employer is paying based on the number of hours of work instead of the job performed. Depending on the situation, Ray may be improperly classified as an exempt employee.

Minimum Salary Requirement

Exempt employees cannot be paid less than the minimum wage, even if they work part-time. The salary requirements for exemption are not based on hours worked. The salary requirement for exempt status requires being paid double the minimum hourly wage based on a 40-hour workweek, no matter how many hours the employee is scheduled to work.

Example: Clem is working as an audio technician professional at a recording studio. Clem works between 40 to 50 hours per week at a set salary of $45,000 per year. Clem makes a number of mistakes that require additional editing work to fix. Clem’s boss says Clem will have to work with lower-profile clients while he continues learning the job. As a result, his salary will be reduced to $40,000.

Clem’s salary at $40,000 per year is lower than the minimum salary requirement for exempt white-collar employees in 2024. The minimum salary is $66,560. Clem cannot be considered an exempt employee because he is being less than the minimum salary requirement.

Change in Job Duties

Even if an employee meets the requirements to be classified as exempt, they may lose the exempt status with a change in job duties. An exempt employee must be primarily engaged in executive, administrative, or professional duties and regularly exercise discretion and independent judgment.

Example: Danny is working as an HR manager at a hipster clothing company. Danny’s job duties and salary meet the California exempt requirements for a white-collar worker.

Danny’s employer is purchased by another company. Danny’s job duties are moved around because the new company is bringing in their own HR staff. Danny is happy to get to keep his job and maintains the same salary.

However, Danny is now working under the direction of the head HR manager. Danny spends about 75% of his time doing administrative tasks and only about 25% of his time using his independent judgment in dealing with HR matters.

The change in Danny’s duties may result in a loss of exempt status. As a non-exempt employee, Danny’s employer may have to provide rest breaks, meal breaks, and pay Danny for any overtime work.

5. Can I be fired for complaining about misclassification?

An employer cannot be fired or retaliated against for reporting labor law violations. Firing an employee for questioning exempt or non-exempt status may amount to unlawful retaliation.¹⁴

An employer cannot take retaliatory action, including a reduction in pay, threatening disciplinary action, or termination related to unpaid wages. Firing an employee for notifying the employer of misclassification may be considered “wrongful termination”.

If an employer retaliates against an employee for filing a wage/hour lawsuit, the employee may have an additional cause of action against the employer. The employee may be able to seek money damages, reinstatement, back pay, or other equitable relief.

6. Can I sue my employer for misclassification?

If your employer has misclassified you as exempt, you may be able to seek unpaid wages for labor law violations. It is illegal for an employer to take away vacation time or refuse to pay an employee for unused vacation time after the employee leaves the company.

The damages available for misclassifying an employee will depend on the situation. A successful employee misclassification lawsuit may result in damages including:

• Unpaid overtime
• Minimum wage violations
• Missed rest breaks
• Missed meal breaks
• Interest
• Legal fees
• Court costs

Additionally, under federal law, an employee who was misclassified may be able to seek double damages.¹⁵

In many cases, an employer will misclassify multiple employees in violation of California and federal labor laws. This can lead to a class-action lawsuit involving multiple plaintiffs. Wage and hour class action lawsuits often involve failure to properly classify employees, unpaid wages, and failure to pay overtime.

Contact us for help…

For questions about California exemption laws and misclassified employees or to discuss your case confidentially with one of our California labor and employment attorneys, do not hesitate to contact us at Shouse Law Group.

We have local employment law offices in and around Los Angeles, San Diego, Orange County, Riverside, San Bernardino, Ventura, San Jose, Oakland, the San Francisco Bay area, and several nearby cities.

See our related article, What does “full time exempt” mean? A labor lawyer explains.

Work in Nevada? See our article on misclassified non-exempt employees in Nevada.

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