More News About Exempt Employees

Important (and Costly) Clarification about Exempt Employees

Classifying an employee as exempt from overtime is risky business these days.  We often work with employers to help them assess whether a position falls within the exempt category under the state's definitions in the Industrial Wage Orders or the federal Fair Labor Standards Act.  We wish classification was a black and white call, but it often has grey thrown in.  As a result, there are frequent court rulings on an employer's actions in this area.  Two important appellate court rulings have recently been published outlining more clarity around these exempt classifications.

Exempt Employees Must be Paid on a "Salary Basis."  (Negri v. Koning & Assoc.)

Under the CA state law, exempt employees must be paid a predetermined amount (at least two times the state minimum wage for full time employment) that is not subject to a reduction based on the quantity or quality of work.  In the case of Negri v. Koning & Assoc., the plaintiff was an insurance adjuster who was classified as exempt and paid $29 per hour.  He did not receive a flat or any guaranteed salary. However, he always worked at least 40 hours per week and often worked additional hours.  He was also paid $29 per hour for each additional hour he worked overtime, not time-and-one-half as a non-exempt employee would be paid.  The employee sued his employer alleging he should have been classified as non-exempt and received overtime pay as a non-exempt employee would have been paid. 

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