Overtime Exemption

What Is an Overtime Exemption?

An overtime exemption is a classification that excludes certain employees from California's overtime requirements. Exempt employees are not entitled to overtime pay for hours worked beyond 8 in a day or 40 in a week, nor to meal and rest break protections.

California has stricter exemption standards than federal law. An employee may be exempt under federal rules but still non-exempt under California law—and California law applies to work performed in the state.

California Exemption Requirements

To qualify for an exemption in California, employees must meet both a salary test and a duties test. Meeting only one is not enough.

Salary Test

For 2024, exempt employees must earn:

• Minimum salary: At least 2× state minimum wage for full-time work
• 2024 requirement: $66,560/year ($1,280/week) based on $16/hour minimum wage
• Paid salary basis: Fixed amount regardless of hours worked or quality of work

The salary threshold increases automatically when minimum wage rises.

Duties Tests

In addition to salary, exempt employees must meet specific duties requirements based on their exemption category. The key test: The employee must be primarily engaged (more than 50% of work time) in exempt duties.

Types of Overtime Exemptions

Executive Exemption

For managers and supervisors:

Requirement	Details
Salary	At least $66,560/year (2024)
Management duties	Primarily engaged in managing the enterprise or a department
Supervision	Customarily directs the work of 2+ employees
Authority	Has input on hiring, firing, or advancement of supervised employees
Discretion	Regularly exercises independent judgment

Administrative Exemption

For office and non-manual workers:

Requirement	Details
Salary	At least $66,560/year (2024)
Office work	Primarily performs non-manual work related to management or business operations
Discretion	Regularly exercises independent judgment on significant matters
Limited supervision	Work does not require close supervision

Professional Exemption

For learned professionals and creative professionals:

Learned Professional:

Requirement	Details
Salary	At least $66,560/year (2024)
Advanced knowledge	Work requires knowledge acquired through prolonged, specialized education
Fields	Law, medicine, accounting, engineering, teaching, etc.
Intellectual work	Predominantly intellectual and varied, not routine

Creative Professional:

Requirement	Details
Salary	At least $66,560/year (2024)
Creative work	Primarily engaged in invention, imagination, originality, or talent
Fields	Music, writing, acting, graphic arts, etc.

Computer Professional Exemption

California has a specific exemption for skilled computer workers:

Requirement	Details
Compensation	Either salary ($66,560/year) OR hourly rate of $55.58+ (2024)
Skills	Highly skilled in theoretical and practical computer science
Duties	Systems analysis, programming, software engineering, or similar
Independent judgment	Regularly exercises discretion

Outside Sales Exemption

For traveling salespeople:

Requirement	Details
Salary	No minimum salary requirement
Location	Customarily works away from employer's place of business
Sales activities	Primarily engaged in making sales or obtaining contracts
More than 50% outside	Spends majority of time outside the office

California vs. Federal Exemptions

Factor	California	Federal
Salary threshold	$66,560/year (2024)	$35,568/year
Duties test	More than 50% exempt duties	Primary duty (no % requirement)
Computer professional rate	$55.58/hour	No hourly option
Salary basis	Stricter requirements	Some deductions allowed

California employees must meet both California and federal standards—the stricter standard applies.

Common Exemption Mistakes

Job Title Fallacy

Wrong: "They're a manager, so they're exempt."

Right: The title doesn't matter—actual duties and salary determine exemption status.

Salary-Only Analysis

Wrong: "They earn $80,000, so they must be exempt."

Right: High salary alone doesn't create an exemption; duties tests must also be met.

Hybrid Roles

Wrong: "She does some management and some hourly work, so she's partially exempt."

Right: There's no partial exemption. If less than 50% of time is spent on exempt duties, the employee is non-exempt.

Reclassifying to Avoid Overtime

Wrong: Converting non-exempt employees to exempt status when overtime costs rise.

Right: Status depends on actual duties and salary, not employer preference.

Consequences of Misclassification

Treating non-exempt employees as exempt can result in:

Back Pay Claims

• Unpaid overtime (daily and weekly)
• Unpaid meal break premiums
• Unpaid rest break premiums
• Accrued over 3-4 years of statute of limitations

Penalties

Type	Amount
Waiting time penalty	Up to 30 days' wages
PAGA penalties	$100-$200 per pay period
Liquidated damages	Equal to unpaid wages
Interest	10% per year

Class Actions

Systematic misclassification often leads to class action lawsuits:

• All similarly misclassified employees may be included
• Damages multiply across the class
• Attorney's fees add to employer costs
• Public relations damage

Analyzing Exemption Status

Step-by-Step Approach

1. Check salary: Does the employee earn at least the required minimum?
2. Identify exemption category: Which exemption might apply?
3. Analyze actual duties: What does the employee actually do day-to-day?
4. Calculate time spent: Is more than 50% of time spent on exempt duties?
5. Document analysis: Keep records of the classification decision

Red Flags Suggesting Non-Exempt Status

• Hourly or piece-rate pay structure
• Punching a time clock
• Closely supervised work
• Following detailed procedures
• Limited decision-making authority
• Similar work performed by non-exempt employees
• Working alongside supervised non-exempt employees doing the same tasks

Managing Exempt Employees

Even though exempt employees aren't entitled to overtime, employers should:

Track Time (Optionally)

Some employers track exempt employee time for:

• Project management
• Client billing
• Workload assessment
• PTO tracking

Avoid "Docking" Salary

Improper deductions from salary can destroy exempt status:

• Don't deduct for partial-day absences
• Don't reduce pay for quality issues
• Only make deductions California law permits

Regular Reviews

• Audit exemption classifications annually
• Review when job duties change significantly
• Update analysis when salary thresholds increase
• Document the basis for exemption decisions

When to Seek Legal Advice

Consider consulting employment counsel when:

• Creating new exempt positions
• Employees' duties change substantially
• Preparing for acquisitions or audits
• Responding to DLSE complaints
• Facing potential class action exposure
• Minimum wage increases affect salary thresholds

Proper exemption classification protects both employees' rights and employers from costly litigation.