2. Does the employee have 2 or more employees reporting to them?

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1 California Exempt vs. n-exempt Test as of 1/1/2016 Executive Exemption: The executive exemption applies to one who is in charge of unit or department within a company, and who ordinarily supervises the activities of others. In order for an employee to qualify for this exemption, they must meet all 6 of the following: 1. Does the employee oversee the enterprise, or a distinct division of your company? 2. Does the employee have 2 or more employees reporting to them? 3. Does the employee have authority to hire and fire those who report to them, or make recommendations that are strongly taken into account in these areas? 4. Does the employee regularly exercise discretionary powers in his work? 5. Does the employee earn a minimum of $3, per month? 6. Is this employee primarily engage in management type exempt duties for 51% or more of their work time? If you answered to any of these questions, the worker should be classified as a nonexempt executive employee. For the purposes of the executive exemption, primarily engaged in means that more that or half of the employee s work time must be spent doing exempt level work. This means that an exempt employee must spend more than 50 percent of their time managing the work of those who report to them as well as doing other exempt duties.

2 DLSE Exempt vs. n-exempt Test as of 1/1/2016 Page 2 ADMINISTRATIVE EMPLOYEES 1. Is the employee responsible for office or non-manual work directly related to the management policies or general business operations? 2. Does the employee produce work that is the product that the company sells to the open market? 3. Does the employee regularly exercise discretion and independent judgment (as opposed to always following established procedures, or general industry standards)? 4. Does the employee earn at least $3, per month? 5. Do any of the following circumstances describe the employee s regular duties? a. Assisting a proprietor, executive or administrative employee. b. Performing work only under general supervision along technical lines that requires special training, experience or knowledge. c. Executing special assignments only under general supervision. If you answered to numbers 1, 3, 4, and 5 or yes to answer 2, the worker should be classified as a non-exempt administrative employee.

3 DLSE Exempt vs. n-exempt Test as of 1/1/2016 Page 3 PROFESSIONAL EMPLOYEES In order to qualify for the Professional exemption, the employee must be working in one of the following areas, and hold a license or certification from the state of California: Practicing Law Physician Registered Nurse Teaching Teaching Optometry Architecture Engineering Dentistry Computer Architech Must be engaged in an occupation commonly recognized as a learned or artistic profession, and primarily engaged in the performance of: 1) Work requiring knowledge of an advanced type (generally a Master s degree or higher) in a field of science or learning which is customarily acquired by a prolonged course of study, and is distinguished as different from a general academic education, or training obtained through an apprenticeship, and also distinguished as different than the performance of routine mental, manual, or physical processes or work. 2) Work that is original and creative in character in a recognized field of artistic endeavor, (as opposed to work which can be produced by a person endowed with general manual or intellectual ability, and training.) and the result of which depends primarily on the invention, imagination, or talent of the employee or work that is an essential part of, or necessarily incident to any of the work above. To qualify as either a learned or artistic profession, the work must be predominately intellectual and varied in character (as opposed to routine mental, manual, mechanical, or physical work) and of such character that the output produced, or the results accomplished cannot be standardized in relation to a given period of time. 1. Does the employee consistently exercise discretion and judgment? 2. Is the employee paid a salary of at least $3, per month? 3. As of 1/1/16, for Physicians the minimum pay is $76.24 per hour. 4. As if 1/1/16, for Computer software design engineers, the minimum compensation is one of the following: (see page 5 below) $41.85 per hour $7, per month $87, per year With regard to the licensing requirement for professional employees, the state Labor Commissioner has indicated that: Medicine includes physicians but not nurses; Attorneys are exempt, but paralegals are not; Certified public accountants are exempt, but uncertified accountants are not; Licensed civil, mechanical, and electrical engineers are exempt, but junior drafters or engineers are not. There are several professional occupations that are specifically listed as being non-exempt. These occupations include artists, copy writers, editors, librarians, nurses other than an RN, photographers, social workers, statisticians, and teachers (other than if state certified). Unless an employee in one of these occupations meets one of the exemptions discussed in this workbook, based in the duties of the job, the employee must be classified as non-exempt.

4 DLSE Exempt vs. n-exempt Test as of 1/1/2016 Page 4 OUTSIDE SALES EMPLOYEES 1. Is the employee employed for the purpose of outside sales? 2. Does he/she spend more than 50 percent of working time away from the employer s place of business? 3. Does the employee sell tangible or intangible items, such as goods, insurance, stocks, or real estate? Or does h/shee obtain orders or contracts for services? 4. Does the employee spend less than 20 percent of his time engaged in activities not described in question 3? 5. Is the employee 18 years of age or older? If you answered to any of these questions, the worker should be classified as a nonexempt outside sales employee. There is no salary test for outside sales personnel. California law does not allow work performed incidental to and in conjunction with the employee s own outside sales or solicitations, including incidental deliveries and collections, to be considered exempt work. This distinction is particularly important for route salespeople and others who perform many functions other than sales in an average day, such as delivery, repair, and maintenance.

5 DLSE Exempt vs. n-exempt Test as of 1/1/2016 Page 5 INSIDE SALES EMPLOYEES Wage Order 4 (Professional, Technical, Clerical, Mechanical and Similar Occupations) and Wage Order 7 (Mercantile Industry) contain exemptions for some inside commissioned sales employees. However, the exemption is from overtime, not from the other requirements of the wage orders such as minimum wage, meal and rest breaks and tracking hours worked. Generally, the exemption applies if the employee earns more than 1.5 times the minimum wage, and more than half of the employee s compensation represents commission earnings. For an employee to be exempt under Wage Order 4 or Wage Order 7, the following requirements must be met: 1. Does the employee earn at least $15.01 per hour for each and every hour that they work? 2. Payment of commission is paid in the pay period in which the sale is made, and not deferred to any other pay period? 3. Is 50% or more of the employee s income for any given week from commission on sales obtained for each pay week? Additional tes: The test for Inside Sales Exemption is made on a weekly basis, and is therefore subject to change from one week to the next. In any week in which the employee s earnings from commissions drops below 50%, the exemption is lost, and the employee must be paid 1.5 times minimum wage for all hours over 8 in a day or 40 in a week in which the commission drops below 50%. Additionally, the test for Outside Sales Exemption is subject to the California test as to whether or not the compensation plan meets the bona-fide commission plan requirements, and is looked at in minimum 1 month increments.

6 DLSE Exempt vs. n-exempt Test as of 1/1/2016 Page 6 COMPUTER PROFESSIONAL EMPLOYEES 1. Does the employee primarily engage in work that is intellectual or creative? 2. Does the employee primarily exercise discretion and independent judgment? 3. Is the employee considered highly skilled and proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering, and routinely involved in system design, configuration of systems, or programming of computer software? 4. Is the employee paid at least $41.85 per hour, or $7,265.43per month as of 1/1/2016? 5. Do the employee s regular duties consist of one or more of the following? a. Application of systems analysis techniques and procedures, including consulting with users to determine hardware, software, or system functional specifications; b. Design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; or c. Documentation, testing, creation, or modification of computer programs related to the design of hardware or software for computer operating systems. If you answered to any of these questions, the worker should be classified as a nonexempt computer professional employee.