By expanding the number of workers who qualify for overtime pay under federal law, President Obama would be bringing the law of the land into line with California’s existing exempt/non-exempt labor laws.

Under current federal rules, salaried workers who make more than $455 a week – which is below the poverty level for a family of four — are exempt from overtime. California’s threshold is $640 a week, and is scheduled to reach $800 a week by 2016.

However, the U.S. Chamber of Commerce and other business interests have already voiced their displeasure with Obama’s executive order. Critics say the move would hurt small and medium-size businesses and might drive employers to cut jobs.

Correctly classifying exempt and non-exempt employees is among the hardest things an employer has to do. Employers often err by classifying their employees as exempt or non-exempt based on job title. In reality, employers have to look carefully at their employees’ responsibilities to make the right choice.

In California, employees are exempt from overtime pay if 1) their monthly salary is no less than two times the state minimum wage for full-time employment and 2) they can be classified as executive, administrative or professional. However, those classifications have to meet strict criteria, enumerated below.

To be classified as an executive, an employee must:

  • Have as his or her primary duty the management of the business or one of its departments or subdivisions and
  • Customarily and regular direct the work of at least two or more full-time employees or their equivalent and
  • Have the authority to hire or fire other employees or have significant influence on hiring, firing, advancement, promotion or change of status of other employees and
  • Customarily and regularly exercise discretionary power and
  • Devote more than 50 percent of his or her work time to the activities described above

An exempt administrative employee must:

  • Have as his or her primary duty the performance of work directly related to management policies, or the general business operations of the employer or the business’s customers and
  • Customarily and regularly exercise independent judgment on matters of significance and
  • Regularly and directly assist a proprietor or an exempt administrator, or perform – under only general supervision – work along specialized or technical lines requiring special training, experience or knowledge, or devote himself or herself to special assignments and tasks under only general supervision and
  • Devote more than 50 percent of his or her work time to the activities described above

An exempt professional employee must:

  • Be licensed or certified by the state of California and be primarily engaged in the practice of law (lawyers, not legal assistants), medicine (physicians, not nurses), dentistry, optometry, architecture, engineering, teaching, accounting (CPAs only), or be primarily engaged in an occupation commonly recognized as a learned or artistic profession and
  • Customarily and regularly exercise independent judgment in the performance of the above duties and
  • Perform work that is predominantly intellectual and varied in character

If you are an employer who is confused or has questions about exempt and non-exempt employees, contact Johnson Employment Law for guidance.