What’s the difference between exempt and non-exempt employee?

All employees are governed by the minimum wage, overtime, meal break, and rest break rules of the California Industrial Welfare Commission (IWC) unless they are exempt from those rules; thus all employees are classified as either “exempt” or “nonexempt.”

Whether an employee is exempt or nonexempt depends on (1) how much s/he is paid (twice the minimum wage), (2) how s/he is paid (salary), and (3) what kind of work s/he does.  Since the minimum salary requirement is contingent upon the minimum wage, it is important that you review your exempt employee salaries every year to ensure they are keeping up with the annual increase in minimum wage.

Since it is difficult to meet each of the foregoing criteria, many exempt employees are misclassified.  Because of this, we have developed a proprietary Employee Classification Questionnaire available with our Employer Handbook that you should fill out for every exempt employee you hire (or promote to exempt status) to ensure they are properly classified.

Note: Misclassification of nonexempt employees as exempt can lead to HUGE liabilities.A recent case investigated by the Labor Commissioner’s Office found that a Jack in the Box franchise owner had misclassified 40 managers as exempt employees.The citations issued included $416,783 in unpaid overtime wages and penalties, $218,227 in minimum wage violations and penalties, $169,427 in liquidated damages and $98,647 in waiting time penalties (when workers are paid less than minimum wage, they are entitled to liquidated damages that equal the amount of underpaid wages plus interest).