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Overtime Pay

California employers are obligated to follow both the Federal rules regarding the payment of overtime as well as the California rules. A comparison of the differences between the Federal rules and California's rules is beyond the scope of this article which instead will focus on California's rules which often are more restrictive than the Federal rules in any event.

The issue of the payment of overtime time to employees raises two issues. First, which employees must be paid overtime and which employees are exempt from the overtime laws. Two, for employees who must be paid overtime, when must overtime be paid? This article focuses on which employees must be paid overtime.

As a general rule, all employees must be paid overtime unless their job duties fit into a recognized exemption from the overtime rules. In order to qualify as an exempt employee, more than 50% of his or her job duties must consist of job duties that are recognized as exempt. There are three primary classes of employees who are exempt from the overtime rules (i.e. they do not need to be paid overtime):

(1) Executive exemption. Employees qualify for this exemption if they are employed in an executive capacity and where (a) their duties and responsibilities involve the management of the enterprise in which they are employed or of a customarily recognized department or subdivision thereof; (b) they customarily and regularly direct the work of two or more other employees therein; (c) they have the authority to hire and fire other employees or whose suggestions and recommendations as to the hiring or firing and as to the advancement and promotion or any other change of status of other employees will be given particular weight; (d) they customarily and regularly exercise discretion and independent judgment; and (e) they are primarily engaged in duties which meet the test of the exemption. Such an employee must also earn a monthly salary equivalent to no less than two times the state minimum wage for full-time employment (i.e. 40 hours per week).

(2) Administrative exemption. Employees qualify for this exemption if they are employed in an administrative capacity and where (a) their 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 (b) they customarily and regularly exercise discretion and independent judgment, and (c) they regularly and directly assist a proprietor or an employee employed in a bona fide executive or administrative capacity, or (d) they perform under only general supervision work along specialized or technical lines requiring special training, experience, or knowledge, or (e) they execute under only general supervision special assignments and tasks; and (f) they are primarily engaged in duties which meet the test of the exemption. Such employee must also earn a monthly salary equivalent to no less than two time the state minimum wage for full time employment. This exemption is only available to employees, such as the director of human resources or accounting, who are not engaged in producing the goods or services of the employer.

(3) Professional exemption. Employees qualify for the professional exemption if they are employed in a professional capacity and where (a) they are licensed or certified by the State of California and are primarily engaged in the practice of one of the following recognized professions: law, medicine, dentistry, optometry, architecture, engineering, teaching, or accounting, or are primarily engaged in an occupation commonly recognized as a learned or artistic profession, including someone primarily engaged in the performance of (i) certain types of work requiring knowledge of an advanced type in a field or science or learning customarily acquired by a prolonged course of specialized instruction and study, or (ii) work that is original or creative in character in a recognized field of artistic endeavor, and (iii) whose work is predominantly intellectual and varied in character. Such employee must also customarily and regularly exercise discretion and independent judgment in the performance of such duties and earn a monthly salary of no less than two times the state minimum wages for full-time employment.

While the executive, administrative, and professional exemptions are the primary exemptions for the overtime laws, there are other more specific requirements concerning, for example, computer professionals and outside salespeople. Also, within each exemption, there often is a complex analysis that goes into determining whether a particular job category can properly be considered exempt from the payment of overtime wages. Thus, employers are encouraged to consult with their labor and employment attorneys if they have questions about whether a particular employee must be paid overtime.

 

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