Exemption and Overtime
There are federal and state overtime and minimum wage laws. Because California's laws are more generous, employers and workers should usually focus on California law. Workers performing some types of work are "exempt" from overtime pay and minimum wage laws. Courts usually construe exemptions narrowly and against the employer. But the types of work exempt from overtime have grown considerably over the past 25 years.
The law requires that any person who works more than eight hours in a day, or 40 hours in a week, receive 1.5 times regular base pay for the period that exceeds these limits. Any person who works more than 12 hours in a day or more than eight hours on the seventh consecutive day of work is entitled to two times regular base pay for the time that exceeds these limits. No agreement between a worker and her employer to waive overtime pay is valid. In California, the Division of Labor Standards Enforcement (DLSE) enforces wage and hour laws.
Non-Exempt Computer Professionals
California Labor Code Section 515.5 provides that computer professionals are exempt from overtime if their employment meets the following criteria:
- The employee is engaged in primarily intellectual or creative work that requires the exercise of discretion and independent judgment (defined at CLC 515.5(a)(2)(A)-(C);
- The employee is highly skilled and is proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, or software engineering; and
- The employee's rate of pay exceeds $81,026.25 per year (or $38.89 per hour).
The new minimum non-exempt wage rate became effective January 1, 2012 and represented a 95-cent increase in the hourly rate for computer professionals, from $37.94 to $38.89 per hour. The monthly rate increased to $164.69, from $6,587.50 to $6,752.19 and the annual salary increased $1,976.25, from $79,050 to $81,026.25.
This means that any computer professional paid less than $81,026.25 per year is not an exempt employee in California and must be paid hourly and compensated for overtime. Additionally, merely paying $81,026.25 per year is not enough. The job and the employee must also meet the other requirements listed.
Why Overtime Are Beneficial
Over the years, overtime exemptions have grown. Because many people are innumerate when it comes to their own time and wages, workers often see "exempt" status as a badge of superiority and "non-exempt" as some sort of blue collar stigma. Entry level junior partners at top ten law firms earn roughly $200,000 per year and work 80 hours per week. This translates to about $96 per hour. While that is a great wage, a lieutenant highway patrolman in Nevada makes base pay of $80.53 per hour and is entitled to overtime, bringing his average wage in an 80 hour week to at least $100.66 per hour (assuming he never breaks the double time mark). The highway patrolman also receives a retirement pension of 90% of salary for life after 25 years of work.
The qualifications for a highway patrol lieutenant is graduation from high school and considerable experience of about five years in police work. The partner at a top ten law firm must study for at least seven years past high school while not earning income, graduate from one of the best and most competitive law schools in the nation, work very long hours for at least five years, and often face debilitating student loan debt in excess of $100,000 and sometimes double that. Who seems the smarter worker here?
The smug postmodern worker who feels a badge of accomplishment in receiving the same pay regardless of whether she works 38 hours or 100 hours per week ought to learn to use a calculator. The deterioration of working conditions and family life in the United States can be traced in large part to expanding exemptions that play havoc on the innumerate American mind. Most exempt workers have little idea what they are being paid per hour because their time is not sufficiently valuable to them to bother calculating it.
Calculating Base Pay
Regular pay for overtime calculations is the hourly rate, or calculated hourly rate from salary. The regular hourly rate includes nondiscretionary bonuses paid based on hours worked, production or proficiency. Bonuses and pay excluded from regular pay for overtime calculation purposes include: special bonuses for "good service" or "loyalty," expense reimbursements, vacation pay, premium pay for weekend or holiday work, gifts and other pay not dependent on hours worked.
Who Is Exempt and Who Isn't?
If sued, an employer has the burden to prove that a worker's job is exempt and so it is wise for employers to carefully consider and document why they believe a certain worker's job to is exempt before paying the worker as if exempt. Merely claiming a job is exempt and then worrying later about "producing" an explanation and documentation is bound to turn out badly.
Exemptions are typically applied based on the duties the worker performs in an individual workweek. Employees performing both exempt and non-exempt duties in the same workweek are normally not exempt in that workweek.
The Industrial Welfare Commission (IWC) issues "Wage Orders" interpreting the wage and hour laws. The IWC allows some exceptions to required overtime, for example agreed upon "4-10" work weeks do not require the employer to pay overtime where the worker works 10 hours per day four days per week instead of eight hours per day five days per week.
Additional overtime exempt employees include:
- Aircraft salespeople
- Airline employees
- Amusement/recreational employees in national parks/forests/Wildlife Refuge System
- Babysitters on a casual basis (also not subject to minimum wage)
- Boat salespeople
- Buyers of agricultural products
- Companions for the elderly (also not subject to minimum wage)
- Country elevator workers (rural)
- Workers with disabilities (get OT, but not subject to minimum wage)
- Domestic employees who live-in
- Farm implement salespeople
- Federal criminal investigators (also not subject to minimum wage)
- Firefighters working in small (less than 5 firefighters) public fire departments
- Fishing (also not subject to minimum wage)
- Forestry employees of small (less than 9 employees) firms
- Fruit & vegetable transportation employees
- Homeworkers making wreaths (also not subject to minimum wage)
- Houseparents in non-profit educational institutions
- Livestock auction workers
- Local delivery drivers and driver's helpers
- Lumber operations employees of small (less than 9 employees) firms
- Motion picture theater employees
- Newspaper delivery (also not subject to minimum wage)
- Newspaper employees of limited circulation newspapers (also not subject to minimum wage)
- Police officers working in small (less than 5 officers) public police departments
- Radio station employees in small markets
- Railroad employees
- Seamen on American vessels
- Seamen on other than American vessels (also not subject to minimum wage)
- Sugar processing employees
- Switchboard operators (also not subject to minimum wage)
- Taxicab drivers
- Television station employees in small markets
- Truck and trailer salespeople
Common Exempt Job Duties
Administrative, executive and managerial workers. Workers who spend more than half of their work time in administrative, executive or professional duties are generally exempt. The IWC and courts have found that bookkeepers, secretaries, and clerks who do not perform work directly related to management policies or general business administrative work are non-exempt. Merely claiming that a worker is administrative does not make him exempt.
- An administrative employee is exempt if he is: (1) regularly and directly assist the business' proprietor or another exempt employee, (2) perform under only general supervision work that is specialized or technical and requires specialized training or knowledge, or execute special assignment sand tasks under only general supervision.
- An executive or manager is exempt if she directs two or more employees (80 hours or more of subordinate time), is authorized to hire or fire employees) and must be paid a salary at least twice minimum wage.
IWC and the courts have found many claimed executive, managerial and administrative workers to be non-exempt including:
- Escrow workers working for a title company
- Insurance claims investigators and adjusters
- Computer specialists performing simple programming
- Television news producers and sports broadcasters
- Probation officers
- Indoor wholesale salespeople working for an electrical supplier
- Police detectives and border patrol agents
- Convention planners employed by a tourist bureau
- Electronics technicians repairing satellite equipment
Professional workers who must have certain licenses to perform work are exempt from overtime laws.
Computer Software Professionals are exempt only if they work in highly theoretical aspects of computer software and make more than $41.00 per hour. It is notable that there are hundreds of thousands of computer programmers, systems analysts, and other computer software workers who neither work in highly theoretical aspects of computer software nor are paid $41.00. The law requires both conditions to be met for the worker to be exempt.
Commissioned sales employees of retail or service establishments are exempt from overtime if more than half of the employee's earnings come from commissions and the employee averages at least one and one-half times the minimum wage for each hour worked.
Computer programmers, systems analysts and other software and hardware-related workers are exempt under FLSA Section 13(a)(17) if they are paid at least $27.63 per hour.
Drivers, driver's helpers, loaders and mechanics are exempt from the overtime pay provisions of the FLSA if employed by a motor carrier, and if the employee's duties affect the safety of operation of the vehicles in transportation of passengers or property in interstate or foreign commerce.
Farmworkers employed on small farms are exempt from both the minimum wage and overtime pay provisions of the FLSA. Young workers employed on small farms, with parental consent, are also exempt from the child labor provisions of the FLSA. Other farmworkers are exempt from the FLSA's overtime provisions.
Salesmen, partsmen and mechanics employed by automobile dealerships are exempt from the overtime pay provisions of the FLSA.
Seasonal and recreational establishments: Employees employed by certain seasonal and recreational establishments are exempt from both the minimum wage and overtime pay provisions of the FLSA.
Executive, administrative, professional and outside sales employees (as defined in Department of Labor regulations) and who are paid on a salary basis are exempt from both the minimum wage and overtime provisions of the FLSA.
Employers may not defend that the worker's overtime was unauthorized. If the worker works overtime, the employer must pay overtime. Because the employer is charged with responsibility to control the workplace, an employee performing unauthorized work should be excluded from the worksite, disciplined, or terminated, but the worker is entitled to pay including overtime for work performed.