Under California law, employees are typically entitled to overtime pay if they work more than eight hours a day or 40 hours a week. However, certain employees qualify as California exempt employees, meaning they are not subject to these overtime requirements. These exemptions are determined by wage orders issued by the Industrial Welfare Commission (IWC). The IWC has issued 17 distinct “wage orders,” each applicable to different categories of workers.
For example, Wage Order 4-2001 outlines specific exemptions for California exempt employees in “administrative,” “executive,” and “professional” roles. This wage order incorporates federal regulations from the Fair Labor Standards Act (FLSA) as of the date the order was enacted. The criteria for determining administrative and professional exemptions under California law closely align with federal guidelines.
Employers should carefully evaluate job duties and responsibilities to ensure employees are correctly classified as exempt under California law, as misclassification can result in penalties.
A person employed in an administrative capacity is defined in part as any employee:
- Whose duties and responsibilities involve the performance of office or non-manual work directly related to management policies or general business operations of the employer or the employer’s customers; and
- Who customarily and regularly exercises discretion and independent judgment; and
- Who performs under only general supervision work along specialized or technical lines requiring special training, experience, or knowledge, or who executes under only general supervision special assignments and tasks; and
- Who is primarily engaged in duties that meet the test of the exemption; and
- Who earns a monthly salary equivalent to at least two times the state minimum wage for full-time employment.[5]
A person employed in a professional capacity is defined in part as any employee:
- Who is licensed or certified by the State of California and is primarily engaged in the practice of one of the following recognized professions: law, medicine, dentistry, optometry, architecture, engineering, teaching, or accounting; or
- Who is primarily engaged in an occupation commonly recognized as a learned or artistic profession;
- Who customarily and regularly exercises discretion and independent judgment in the performance of duties; and
- Who earns a monthly salary equivalent to no less than two (2) times the state minimum wage for full-time employment.[6]
[1] Cal. Lab. Code § 510, subd. (a).
[2] The IWC, established by the Legislature in 1913, was the state agency authorized to formulate the regulations, or wage orders, that govern employment in California. In fulfilling its broad statutory mandate to regulate wages, hours, and working conditions of California employees, the IWC acted in a quasi-legislative capacity. Although the IWC was defunded effective July 1, 2004, its wage orders remain in effect.
[3] Cal. Code Regs., tit. 8, §§ 11010-11170.
[4] Cal. Code Regs., tit. 8, § 11040.
[5] Wage Order 4-2001, Cal. Code Regs., tit. 8, § 11040, subd. 1(A)(2).
[6] Cal. Code Regs., tit. 8, § 11040, subd. 1(A) (3).
