HR Management & Compliance

Exempt Employees: Federal Government Proposes Overhaul of Who’s Exempt from Overtime, but California Rules Still Stricter

The U.S. Department of Labor recently published a proposal to update the 50-year-old Fair Labor Standards Act (FLSA) regulations defining white-collar exemptions. The new rules could take effect by the end of the year after a public comment and review process. But, as explained below, the changes probably won’t have much impact on California employers because state regulations regarding who’s exempt from overtime provide greater protection for workers.


The HR Management & Compliance Report: How To Comply with California Wage & Hour Law, explains everything you need to know to stay in compliance with the state’s complex and ever-changing rules, laws, and regulations in this area. Coverage on bonuses, meal and rest breaks, overtime, alternative workweeks, final paychecks, and more.


Minimum Salary Requirements

The proposed federal regulations would raise the minimum salary threshold for exempt employees to $425 a week (or $22,100 a year), up from the current requirement of $155 a week. But the California minimum salary based on two times the current state minimum wage is still higher.

Simplified Duties Tests

Under the current FLSA overtime exemption rules, there are both long and short duties tests establishing three main categories of exempt workers: executives, administrators, and “learned” or “creative” professionals. The proposed rules drop the largely outdated long test for each exemption, which provides among other things that exempt employees can perform nonexempt duties no more than 20 percent of their workweek. The proposal retains the short tests for exemption from overtime but with some changes.Here’s an overview of the proposed rules—but keep in mind the California exemption requirements for each category remain stricter:

  • Executive exemption. An employee must: 1) have a primary duty of managing the enterprise or a customarily recognized department or subdivision; 2) customarily and regularly direct the work of two or more other employees; and 3) have authority to hire or fire or have particular weight given to suggestions and recommendations about the hiring, firing, advancement, promotion, or any other change of status of other employees.

     

  • Administrative exemption. An employee must: 1) have a primary duty of performing office or nonmanual work directly related to the management or general business operations of the employer or the employer’s customers; and 2) hold a “position of responsibility” with the employer, defined as either performing work of substantial importance or performing work requiring a high level of skill or training. This second requirement replaces the old “discretion and independent judgment” requirement that has caused much confusion and litigation.

     

  • Professional exemption. For the learned professional exemption, employees must have a primary duty of performing office or nonmanual work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction, but which also may be acquired by alternative means such as an equivalent combination of intellectual instruction and work experience. The rules for the first time recognize as exempt certain employees who gain equivalent knowledge and skills through a combination of job experience, military training, or attending a technical school or community college, rather than having a specialized degree.

For the creative professional exemption, employees’ primary duty must be performing work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.

Salary Deductions

The proposed rule permits salary deductions for full-day absences taken for disciplinary reasons, such as sexual harassment or workplace violence. But California law continues to prohibit disciplinary deductions for absences of less than a week. The new rules also state that partial-day deductions are prohibited, which is consistent with California law.