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Misclassified Management: How Employers Take Advantage of Overtime

by | Jan 15, 2024 | General Issues, Wage & Hour

keyboard with a finger pressing a key with the word "overtime" on it with a clock next to it.

Introduction

California legal requirements provide that non-exempt employees have the right to a minimum wage and overtime pay. When employers misclassify employees as exempt when they should be hourly, this allows companies to avoid paying overtime and providing any required meal and rest breaks. Misclassification may also be a means for employers to skirt minimum wage requirements.

    What is the Difference Between Exempt and Non-Exempt Employees?

    In California, non-exempt status means that an employee is entitled to overtime compensation, minimum wage, and meal and rest breaks.  Certain jobs are non-exempt in nature while other jobs may be qualified to be classified as exempt positions.  For a chart of the types of employees who can be classified as exempt employees under California’s wage and hour laws, see here.

    Whether a given employee may be exempt or must be non-exempt depends on several factors that must be analyzed depending on the worker’s job duties. Therefore, it is important to consult with legal counsel to determine whether a specified job qualifies as exempt or non-exempt.

      Seek Legal Action

      Legal counsel can help you understand your rights, available options, and advise you on gathering the necessary documents and witnesses to support your claim.

      Since 2001, the attorneys from Rothschild & Alwill, APC have dedicated themselves to workers needing legal assistance. Our experienced labor and employment lawyers can advise you on any potential legal claims. You deserve sound judgment, hard work, skilled representation, and to be treated with dignity during every step of the process.

      Email us or call or office in our Central Valley office in Bakersfield at (661-369-8510) or in Santa Barbara at (805-845-1190) to schedule an initial confidential consultation at no charge. Se habla Español.

      CONTACT US TODAY TO SCHEDULE YOUR FREE CONSULTATION

      Signs of Employer Exemption Misclassification

      Common signs and examples of misclassification include:

      (1) Ignoring minimum salary basis requirements

      Being paid on a “salary basis” means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis. This predetermined amount cannot be reduced because of variations in the quality or quantity of the employee’s work.

      California’s minimum wage ($16/hour as of 2024) also affects the minimum salary an employee must earn in order to be properly classified as exempt. An employee must earn no less than two times the state’s minimum wage for full-time work to meet this initial requirement of the exemption test. As of January 1, 2024, employees in California must earn an annual salary of no less than $66,560 to meet this threshold requirement. See here for more details.

      (2) Skipping the “job duties” test

      Simply paying an employee the minimum salary required (double the minimum wage for full-time work) does not, on its own, render an employee exempt. The employee must not only be paid double the minimum wage but also must be primarily performing certain job duties for an employer – usually those in management, high level administration, or those requiring an advance professional license. Each exemption under California law has its own job duties test. An employer’s failure to apply the applicable job duties test may result in misclassification.

      Note that, when implementing the applicable job duties test, an employer must consider the primary job duties, rather than secondary or incidental duties.

      For details on the job duties for each of the California exemptions listed in the above-referred chart, click on the applicable embedded links in the chart.

      (3) Relying on job title(s) to classify employee(s)

      It is important to note that job titles, or even job descriptions, do not determine exempt status.

      Therefore, just because a job title contains the terms “executive,” “administrative,” “professional,” or “computer,” that does not necessarily mean that the job qualifies for an exemption. Again, both the salary and job duties test must be met. An employer must evaluate an employee’s actual job duties, regardless of job title or job description.

      (4) Not considering changes in employee responsibilities

      Because an employee’s responsibilities may change, employers must regularly reassess an exempt employee’s status classification to ensure that the employee’s position still meets the applicable job duties test.

      (5) Ignoring requirements for day-rate employees

      Employers may choose to pay some employees according to a “day rate” or “daily rate.” That means that the employer pays the employee a flat amount for each day worked, regardless of the number of hours they put in during each day. Importantly, employers must still pay most day-rate employees overtime for all hours worked in a week over 40 hours.

      California law permits employers to pay non-exempt workers on a daily rate basis. However, the employer must still pay an additional amount to compensate for any overtime hours an employee works.

      (6) Making impermissible deductions from an exempt employee’s salary

      For the most part, employers must pay exempt employees their full salary in any workweek in which they perform work. Under California law, deductions from an exempt employee’s salary are permitted only in limited circumstances. For more details on California’s provisions, see the applicable California Department of Industrial Relations opinion letters included in the list here.

      Consequences of Misclassification

      Misclassifying employees as exempt when they are non-exempt causes these employees to lose critical benefits and legal protections, such as minimum wage and overtime entitlements.

      Employers that misclassify employees as exempt may be liable for back wages, including overtime and wages that fail to adhere to minimum wage laws. They may also be subject to related liquidated damages, fines, and attorneys’ fees.

      Pursuing Legal Action

      As explained above, employee misclassification may be intentional or inadvertent. Thus, if you suspect that you have been misclassified as exempt, bring it to the attention of management or human resources. Written communication ensures that your concerns will be documented.

      But if your employer refuses to address or correct your concerns, you can file a complaint with the California Labor Commissioner.

      Also note that, California law, an employer may not fire or otherwise retaliate against an employee for reporting any possible misclassification.

      Because there are legal time limits to bring claims, you should act without delay. Therefore, do not hesitate to contact a qualified attorney who knows the laws applicable to their situation.

      The experienced employment law lawyers at Rothschild & Alwill, APC can advise you on a potential misclassification claim. Email us or call or office in our Central Valley office in Bakersfield at (661-369-8510) or in Santa Barbara at (805-845-1190) to schedule an initial confidential consultation at no charge. Se habla Español.

      Conclusion

      Do not miss out on important compensation and other legal rights due to misclassification of your employee status! As explained above, the legal rules regarding employee misclassification are complicated. Accordingly, it is vital to seek the assistance of attorneys, such as those at Rothschild & Alwill, APC, who are well-versed in all the ins-and-outs of these claims.