Wrong. Simply paying employees a salary does not make them exempt from overtime obligations. The wage orders issued by the California Department of Industrial Relations provide for limited exemptions from some or all of the state's wage and hour obligations (e.g., overtime, minimum wage, record-keeping, uniform and equipment, cash shortage and breakage, meal-period, and rest period requirements of the wage orders) for "white collar" employees and for employees in particular industries and occupations.
The most common exemptions are those for "white collar" employees (i.e., executive, administrative, and professional employees) and outside salespersons. The wage orders themselves do not define what is meant by "executive," "administrative," and "professional" employees. Rather, they provide a test under which an employee will only be considered exempt under the "executive" or "administrative" categories if he or she is engaged in work (a) that is primarily intellectual, managerial, or creative (i.e., more than 50% of employee's time is devoted to such work); (b) that requires exercise of discretion and independent judgment; and (c) for which the monthly remuneration is not less than twice the minimum wage for one month of full time work. The professional exemption applies only to certain enumerated professions such as doctors, lawyers, engineers, and teachers.
In addition to meeting these requirements for the exemption test, an employee must be "primarily engaged" in exempt work. California generally determines whether an employee is "primarily engaged in" exempt work strictly as whether the employee spends more than one-half of his or her time doing such work. As a result, both the exempt quality of each task which an employee performs and the quantity of time which is spent in such tasks must be carefully appraised in determining if an individual is an exempt "white collar" employee.
Furthermore, the California Division of Labor Standards Enforcement ("DLSE") has taken the position that an employee performing exempt and non-exempt duties simultaneously will be deemed to be performing solely non-exempt duties. For example, if the manager of a small restaurant is supervising employees (an exempt duty) while he or she clears a table (a non-exempt duty), the time will be considered non-exempt for purposes of determining whether the manager is "primarily engaged" in exempt work. Whether the DLSE's position will be upheld by California courts has yet to be seen.
This is a complicated area and employers are counseled to seek advice from their employment counsel regarding application to their specific businesses. Copies of the Wage Orders and other useful information can be found on the Department of Industrial Relations website at www.dir.ca.gov.
