Misclassification

WORKING PEOPLE

Are you exempt from overtime? Take the quiz to find out!

Misclassification is when your employer incorrectly classifies you as exempt from wage and hour laws governing your hours worked and how you must be paid for those hours. The “default” rule is that every employee is entitled to things like overtime, minimum wage, meal breaks, and other basic wage and hour protections. Exempt employees are literally exempt from these requirements. In California as well as under Federal law it is the employer’s burden to prove you are exempt. It is one of the most common (and costly) wage and hour mistakes.

So, how do you figure out if you are exempt from overtime? It boils down to an analysis of your job duties, how you spend your time, and how you are paid. I get into more detail in each exemption category linked at the end of the article and also found here. Let me dispel some common errors:

  • You are not exempt just because you are paid a salary;
  • You are not exempt just because you manage other employees;
  • You are not exempt just because you directly assist a C-level executive;
  • You are not exempt just because you perform some classically professional function, like accounting or providing tax advice (and Bookkeepers are generally not exempt);
  • You are not exempt just because of your job title;
  • You are not exempt just because your employer classifies you as exempt.

In 2004, when the US Department of Labor made major changes to Federal Wage and Hour laws, it was estimated at the time that out of 134 million workers in the United States, 19.5 million were excluded from Fair Labor Standards Act (“FLSA”) protections altogether, 45.8 million were “salaried,” and the remaining 69 million were paid hourly.  While it is a common misconception that being paid on a salary means you are exempt from overtime, odds are that a significant portion of those salaried workers, if not almost all of them, were classified as exempt by their employers. (Otherwise, why pay them a salary?)

Exempting almost half of the American workforce from overtime was never the intent of Congress when they originally passed the FLSA following the Great Depression. The intent of Congress in enacting the FLSA was to increase employment by encouraging employers to hire more workers, rather than demand long hours from current employees, and to protect “blue-collar” low wage workers that were working oppressive working hours. If you were in a high level position and were well compensated, you were more likely to be in demand, have more job security, and have better bargaining power in your working conditions. If you were a low wage worker however, you were likely replaceable, had little to no bargaining power, and thus had little to no chance to make your employer voluntarily pay you more for working long hours.  In 1937 (and in the decades that followed when the first Federal Regulations were drafted explaining FLSA exemptions) the American economy was very different than it is now. Industrial and factory jobs were far more prevalent, and in these jobs the delineation between the blue collar production worker and the white collar bosses and supervisors and administrators was easier to spot. Similarly, “office” jobs were limited to more classically “professional” jobs like accountants, lawyers, or financiers. Today, the world is vastly different. Service jobs have replaced factory jobs. More people are in the office than the factory floor. Nonetheless, the old exemption categories remain, albeit with layers and layers of added complexity, and employees and employers alike are left confused as to their application.

There are numerous categories of exempt employees in California, but most exemption classes fall under one of the following categories:

There are other specific exemption classes, such as sheepherders, babysitters, movie projectionists, and taxi-cab drivers. The California Wage Orders are replete with niche exemption categories, all of which have very stringent requirements. Click one of the above categories to learn more.

 

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