Do Employees Get Overtime If They Are Paid A Salary?

Do employees get overtime if they are paid a salary?A common question employment lawyers get is: “I get paid a salary but I work 50, 60, 70 hours a week. Should I be paid overtime?”

As with most legal questions, the answer is far more complicated than the question. But this article attempts to outline the answer without too much legal gobbly-gook.

One of the biggest myths about overtime in California is that people who are paid a salary are never entitled to overtime.  The sad fact is that many people who are paid a salary by their employers are entitled to overtime and don’t receive it, and even more are paid hourly but don’t get any overtime because they work for dishonest companies with shady time-keeping procedures. Thus, if someone tells you that you are not entitled to overtime just because you are paid a salary, they are dead wrong.

In California, everyone is entitled to overtime pay unless they first meet one of the legal overtime exceptions. These exceptions are called “exemptions” under the law. Think of an exemption as a test: if your job passes the test your employer gets rewarded and doesn’t have to pay you overtime; however, if your job fails the exemption, then you are rewarded with overtime. I italicized “job” to emphasize that the test is dependent on your job functions, not on your personal capabilities.

Employers sometimes find it difficult pass an exemption for your job. Undeterred, many companies claim that your job meets the exemption when, in reality, it doesn’t. They do this because they don’t want to pay you the hour. It’s so much easier to pay you a salary – there are no time cards, variable monthly payments, and no overtime.

The next question becomes, what are these exemptions and does your job meet one of them? There are four major exemptions: “administrative,” “executive,” “professional,” and the “computer software professional.” If your job doesn’t meet the requirements for one of these exemptions then you are entitled to overtime pay.

Exemptions Generally

Before I get into each of these big and ugly exemptions, I want to make one thing very clear: often an employee is paid a salary when, under to California law, he should be paid hourly. When this occurs, the employee has been misclassified. Basically, this means the employee’s boss has classified the employee’s job so it meets one of the exemptions, even though the job functions does not allow for it.

This highlights the obvious – employers have a conflict of interest when deciding whether to pay an employee by the hour or a salary. Not surprisingly, employees often get the short end of the stick – and are denied owed overtime compensation.

Administrative Exemption

If you are properly classified as an “administrative employee” then you are an exempt employee and your boss does not have to pay you overtime. In order to be exempt from overtime pay under the administrative exemption, you must:

  1. Be paid a salary of at least $33,279.96/year (for full-time employment), and
  2. Have primary work duties that are directly related to management policies or general business operations of the employer or its customers (as distinguished from ‘production employees’ whose primary duty is producing the goods or services that the employer produces), and
  3. Exercise independent business judgment over matters of substantial importance.
The distinction between production work and administrative work is key here. Production work is easy to understand in the case of companies like Intel. Intel produces micro chips on massive assembly lines. If you work on that assembly line putting together Intel micro chips, you are a production worker and must be paid overtime. On the other hand, administrative work is anything that relates to supporting the business itself, such as accounting, human resources, tax, and legal. Using my Intel example, if you’re an specialist who designs the assembly line, you’re probably an administrative employee and exempt from overtime.

Executive Exemption

If you are properly classified as an “executive employee” then you are an exempt employee and your employer does have to pay you overtime. In order to be exempt from overtime pay under the executive exemption, you must:

  1. Be paid a salary of at least $33,279.96/year (for full-time employment)and
  2. Manage the entire company or a recognized department/subdivision, and
  3. Regularly direct the work of at least 2 or more subordinates in your department, and
  4. Have authority to hire or fire, and
  5. Exercise independent business judgment over matters of substantial importance, and
  6. Spend more than 50% of your time doing 1-5.

Again, you must meet all six requirements.

Professional Exemption

To be exempt from overtime pay under the exemption for “professional” employees, you must:

  • Be licensed and primarily engaged in a legally recognized profession (generally, this includes law, medicine, dentistry, optometry, architecture, engineering, teaching, or accounting), or
  • Be primarily engaged in an occupation commonly recognized as a learned or artistic profession.

In order to be exempt under a “learned or artistic profession,” you must be given no more than the subject matter of your work. This means that if you are told the details of what to draw, photograph, create, or write, you will not be exempt. As such, highly skilled artist that work as computer animators, industrial artists, and cartoonists are all entitled to overtime.

Computer Software Professional Exemption

People who work in the computer software field often work long hours. Frequently, their employer pays them a salary when the law demands hourly compensation. Thus, those long hours go uncompensated when the employee should have been earning overtime.

If you work in the computer software field and are paid a salary of less than $75,000 a year, you may be owed overtime if you have worked more than 8 hours a day or more than 40 hours a week. However, if you meet the “computer software professional” exemption, your employer does not have to pay you overtime.

Generally, to be exempt, first, you must be primarily engaged in work that is intellectual or creative and that requires the exercise of discretion and independent judgment. Second, you must be paid at least $75,000 per year for full-time employment. Third, you must be proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, or software engineering. Finally, you must be primarily engaged in duties that consist of one or more of the following:

  • applying systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications;
  • designing, developing, documenting, analyzing, creating, testing, or modifying computer systems or programs, including prototypes, based on and related to user or system design specifications;
  • documenting, testing, creating, or modifying computer programs related to the design of software or hardware for computer operating systems.

California Labor Code Section 515 Protects Overtime for Salaried Employees

The California Legislature recently passed an amendment to CA Labor Code section 515. The amendment mandates that payment of a fixed salary to a nonexempt employee shall be deemed to provide compensation only for the employee’s regular, nonovertime hours, notwithstanding any private agreement to the contrary. This means that if you should be an hourly employee, but are paid a salary, your salary does not count towards your unpaid overtime. If you file a lawsuit to get unpaid damages, you are owed whatever overtime you worked.

Conclusion

In summary, if you are being paid a salary but are working more than 8 hours per day and/or 40 hours a week you might be owed overtime. The trick is to find out if you have been misclassified as exempt under one of the above exemptions. If you have been, you might want to talk to an experienced employment lawyer to see what your options are. After all, you worked hard for your paycheck. You should now get it in its entirety.

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Branigan Robertson is a California employment lawyer who exclusively represents employees in workplace disputes. He focuses his practice on sexual harassment, wage & hour, wrongful termination, and retaliation. Visit his website at BRobertsonLaw.com or call his office at 949.667.3025.

 

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Filed under Exempt, FLSA – Fair Labor & Standards Act, Hourly or Salary?, Non-exempt, Overtime, Wages and Hours

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