Under California law, the presumption is clear: all employees are considered non-exempt unless they meet very specific legal standards. This means that most workers are entitled to important protections like overtime pay, meal and rest breaks, and minimum wage. However, certain employees may qualify as "exempt," meaning they are exempt from some wage and hour rules—but only if strict legal requirements are satisfied.
At the Law Offices of Paul Cheng, we regularly advise businesses on properly classifying employees under California law to avoid costly disputes, penalties, and lawsuits. Misclassification is one of the most common—and most expensive—mistakes employers make. A job title alone does not make an employee exempt. Employers must analyze both job duties and salary thresholds to ensure compliance. Below, we highlight five of the most commonly used exemptions under California law:
Executive/Managerial Exemption
To qualify for this exemption, an employee must:
- Primarily manage a business or department (spending more than 50% of work time on managerial duties);
- Regularly direct the work of at least two employees;
- Have authority to hire, fire, or make recommendations on such decisions;
- Regularly exercise discretion and independent judgment;
- Earn a salary equivalent to at least two times the state minimum wage for full-time work (as of 2023, at least $64,480 per year).
Unlike federal law, California applies the “primarily engaged” test—meaning the employee must actually spend more than half their time on exempt duties, not just have them as their primary responsibility.
Administrative Exemption
This applies to employees who:
- Spend over 50% of their time on non-manual office work directly related to management or general business operations;
- Regularly exercise discretion and independent judgment;
- Work with minimal supervision in specialized roles requiring specific skills, training, or knowledge;
- Are paid at least two times the state minimum wage for full-time work.
Computer Professional Exemption
Tech professionals may qualify if they:
- Primarily engage in intellectual or creative work requiring discretion and judgment;
- Spend more than 50% of time on tasks like systems analysis, software development, or computer programming;
- Are highly skilled and proficient in their field;
- Earn at least the minimum threshold set by law—$53.80 per hour, $9,338.78 per month, or $112,065.20 per year as of 2023.
Commissioned Inside Sales Exemption
For inside sales employees:
- Earnings must exceed 1.5 times the minimum wage;
- Over half of their compensation must come from commissions.
Important: This exemption only covers overtime. Employers must still provide meal and rest breaks, track hours, and meet other wage law requirements.
Outside Salesperson Exemption
Employees qualify if they:
- Are at least 18 years old;
- Spend more than 50% of their time working outside the employer’s place of business;
- Primarily sell products or services, or obtain contracts.
Final Takeaway for Employers
California’s wage and hour laws are complex and unforgiving. Misclassification can result in significant liability, including back wages, penalties, and attorneys’ fees. The best way to protect your business is to conduct a careful exemption analysis—and to consult experienced legal counsel before making classification decisions.
At the Law Offices of Paul Cheng, we are here to help you navigate these rules and ensure compliance. If you have questions about employee classification or wage and hour issues, contact us today to schedule a consultation.