Q: If an employee is classified as exempt and working over 40 hours per week, how would your law firm make the argument that they are entitled to overtime?
A: The first consideration we take into account is how much the employee is getting paid. One of the requirements to being exempt in California is that you’re paid a certain minimum amount, and that amount is going up significantly.
Under Federal law, that number is going to be increasing to the $50,000 range, which is somewhat higher than what is required by Federal law and California currently. That’s called the “Salary Test.” So if you don’t make enough money in salary, you are automatically going to be non-exempt, and you should be paid by the hour.
The next consideration is how many hours the employee is actually working. If they’re not working more than 40 hours a week or more than 8 hours in a day, it’s probably not going to be a big difference as to whether they are exempt or nonexempt, so long as they are making more than the minimum wage. If they are not working any overtime, there may be little to gain by being properly classified as non-exempt.
Finally, if we determine that they are getting paid enough to satisfy the salary test, and they are in fact working overtime, we analyze what their job duties are and how often they do those job duties. That is where California law and federal law are different.
California has more onerous requirements for an employee to be “exempt.”
Federal law provides that when an employee manages other employees, and does some duties of a manager, the managerial exemption likely applies. In California, we need to consider how much of the employee’s work is managerial as compared to the time that the employee is working on non-managerial duties.
The manager could be doing the exact same work as an hourly employee for a majority of the time and still be exempt under federal law. In California, it’s different. The employee has to be doing managerial work more than 50% of the time. That is where we frequently find some of businesses misclassifying employees as exempt.
For instance, it has been commonplace in smaller retail stores where there is a manager who comes in at 9:00 a.m., opens the shop, works by themselves until about 11:00 a.m., and then another employee comes in. For most of the day, there’s only one employee and the manager and the manager is basically doing the same job as the employee – they’re not managing anybody, not doing any managerial duties – they are just selling merchandise to customers. That would be a classic case of where someone has been misclassified under California law.
There are other tests that we look at. One of the things that a manager has to do is manage two or more people on a regular basis, so we look to see if that’s happening. There are a variety of managerial duties that are specified by regulation and the courts as being traditionally managerial in nature, and we would want to see if the person is actually doing those duties more than 50% of the time.
What are “managerial duties” in the determination of whether someone is properly classified as exempt?
- Involved in the hiring and firing of employees.
- Training of employees.
- Supervising and scheduling employees.
- Evaluating, disciplining and personnel management.
- Providing direction to employees such as coaching, helping people do a better job, et cetera.
- Merchandising, making sure that the good are put in the proper place, displays are set up correctly, making decisions as to how good the displays are and how the display are set up.
- Gathering information to prepare reports, managing payroll.
- Being responsible for the safety and security of the particular store, location, goods, et cetera, and the people in the store.
- Making sure that the store is compliant with various laws including wage and hour laws.
However, we often find that so-called managers are robotically following specific directions given by the home office or “upstairs” so-to-speak, and they are not really making decisions about how work is being performed; they’re just following procedure.
If that’s the case, the tasks listed above may not be managerial duties.