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California Labor Laws for Salaried Employees

This guide covers key aspects of California labor laws for salaried employees
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Navigating California labor laws for salaried employees can be challenging. You should familiarize yourself with numerous intricacies if you want to stay compliant, keep your workforce happy, and keep your reputation untarnished.

This guide covers key aspects of California labor laws for salaried employees, like work hours, overtime, and employee rights. 

It’s an essential read if you want to adhere to all the requirements.

Let’s dive in and explore all the facets of these employee-centric regulations and how you can easily comply using the time-tracking solutions tailored to fit the needs of California employers. 

Defining a Salaried Employee: A Quick Overview

To understand California labor laws for salaried employees, we must first define the basics: what exactly is a salaried employee? 

Put simply, these are the workers you pay a pre-determined amount, whether it’s weekly, bi-weekly, or monthly. They get their paycheck regardless of whether they’ve clocked in a 40-hour week or more than that.

However, there is one important distinction to make: California categorizes salaried employees as either “exempt” or “non-exempt.” 

What’s the difference? 

When discussing exempt workers, you don’t have to worry about the complexities of overtime pay and minimum wage rates. 

Determining which category your employee falls into isn’t arbitrary. It’s based on their job, pay rate, and payment structure. Grasping these classifications is important in understanding California labor laws for salaried employees.

Exempt vs. Non-Exempt: Why Classification Matters and What You Need to Know

According to the law of the state of California, you’re required to categorize your salaried employees as exempt or non-exempt correctly.

To earn the exempt status, an employee needs a steady weekly salary that doesn’t fluctuate based on hours worked or tasks completed.

National criteria under the Fair Labor Standards Act set the minimum weekly salary for an exempt employee at $684, translating to $35,568 annually. 

Yet, California ups the ante for employers, demanding a minimum weekly salary of $1,238, or an annual figure of $64,480, for businesses with 26 or more employees.

Non-exempt employees, although salaried, must earn at least the federal or state minimum wage — whichever is higher. This ensures adequate compensation for their time and effort.

Important Update: Federal overtime regulations are changing. Starting July 1, 2024, the minimum weekly salary for exempt status rises to $844, and then to $1,128 on January 1, 2025.  While California maintains a higher salary threshold, these major federal changes could impact how you classify certain employees. Stay updated on the latest regulations and consult with legal or HR advisors if needed.

Unavailability of Work or Business Closures

When your business closes for any reason, including holidays, exempt employees must still receive their full salary for that week. 

On the other hand, non-exempt employees are paid only for the time they work.

Salaried Employees and Overtime Pay in California

Let’s start by shattering a common myth: salaried status does not automatically exempt an employee from overtime pay. Under California wage law, employees are entitled to an overtime rate for work exceeding 8 hours in a day or 40 hours in a week. 

While exempt salaried employees do not qualify for overtime, non-exempt salaried employees do. It’s up to the employer to prove that an employee’s salary meets the exemption criteria.

Now, we can delve into the specifics for both exempt and non-exempt salaried employees in California.

How Many Hours Can a Salaried Employee Work in California?

In California, a full-time workweek is typically between 32 and 40 hours, although the Affordable Care Act (ACA) considers 30 or more hours full-time.

For non-exempt employees, California law sets overtime pay at 1.5 times the regular rate for hours over 8 in a day or the seventh consecutive workday. If they exceed those limits, the rate doubles. We’ll discuss this in detail below.

The sky — or perhaps, their workload — is the limit for exempt employees. There’s no upper limit on the number of hours they can work a day or a week. They earn a consistent salary, irrespective of the hours clocked.

However, for this status to apply, the employees must satisfy specific duty requirements and earn at least twice the state’s minimum wage based on a 40-hour workweek.

What Are the Minimum Wage Laws in California?

Essentially, employers in California must pay the highest minimum wage rate, whether it is federal, state, or local. 

Currently, the statewide minimum wage is $15.50 per hour. 

However, this rate is not uniform across the Golden State. Several cities and counties have established their own minimum wage laws, setting the bar higher than the state norm.

For example, the minimum wage rate in Berkeley is $18.07, while in Emeryville, it’s $18.67.

The state minimum wage will rise to $16 per hour starting January 1, 2024. Fast-food workers can expect a more significant increase, as their minimum wage will go up to $20 per hour next year.

Right now, California’s minimum wage trumps the federal law rate, which all employers operating a business in this state must follow. But, if a city or county in California has a higher minimum wage, that becomes the new standard for employers operating within that jurisdiction.

Navigating Overtime Eligibility

The distinction between exempt and non-exempt salaried employees is crucial for effective wage management in California labor laws. One-size-fits-all approaches won’t work.

Most class action lawsuits have resulted from an employer’s misclassification of non-exempt employees as exempt from California overtime.

Non-Exempt Salaried Workers and Overtime

Understanding that non-exempt salaried employees fall under the minimum wage and overtime stipulations outlined by the Fair Labor Standards Act (FLSA) is crucial. 

Employers must specify how many hours these employees are expected to work weekly. 

Non-exempt salaried California employees are entitled to overtime pay of 1.5 times their regular rate for any hours worked over 8 in a single day, 40 hours in a week, or any work done on the seventh consecutive day in a workweek.

Non-exempt salaried workers earn double overtime wages when they work more than 12 hours in a single workday or more than 8 hours on their seventh consecutive day of work.

To determine the exact overtime rate for your salaried employees, follow this three-step guide:

  • Annualize the salary. Multiply the employee’s monthly income by 12 to get the annual salary.

  • Break it down to a week. Divide that annual salary by 52 to determine the weekly earnings.

  • Calculate their hourly rate. Finally, divide that weekly salary by 40, the legal maximum of regular weekly hours.

By doing this, you ensure compliance with California labor law for salaried employees and provide a fair and transparent payment structure that benefits everyone involved.

It’s important to note that employers must keep accurate records of their non-exempt employees’ hours worked. Moreover, they should be meticulous about time records for non-exempt employees, which must be accurate down to the minute, capturing their clock in and out times and their meal breaks.

Exempt Salaried Workers: More Than Just a Paycheck

Exempt salaried workers are often considered eligible for overtime pay. Still, it’s more complex than just meeting the minimum salary requirement. 

To classify an employee as exempt, employers must also pass the job duties and salary basis tests, besides meeting the minimum salary requirements. 

Even if an employee’s salary exceeds the minimum threshold but fails one of the other tests, they could still be considered non-exempt and, thus, be eligible for overtime compensation.

Roles usually exempt include professional employees, managerial positions, white-collar workers, and certain independent contractors. 

However, each exemption is grounded in the particularities of the job functions as set by the California labor code. For example, administrative or executive employees may only be exempt if their role is primarily managerial and they have significant independent judgment and decision-making authority.

Is Salary Exempt from Overtime in California?

The question of whether a salaried employee is exempt from overtime pay requires scrutiny, especially within the landscape of California overtime laws

While a high salary might indicate an overtime exemption status, there are other details to be considered. So, when are salaried employees eligible for overtime hours in California? 

Below are the critical conditions that must be met for an employee to be considered exempt from overtime. 

  • Minimum salary requirement: According to the current data, the employee must earn at least $1,238 per week or $64,480 annually if you have 26 or more employees.
  • Salary Basis Test: The employee gets a consistent salary, irrespective of the number of hours worked or the quantity of work completed.
  • Job Duties test: The employee’s primary responsibilities must be executive, administrative, or professional. They should also have substantial decision-making authority related to the business.

Let’s look at a few real-world examples to clarify this better.

Sarah, the Store Manager

Imagine you own a retail store and have a store manager, Sarah, who earns $70,000 per year. While her salary meets the minimum requirement, her primary responsibilities involve sales and stocking shelves rather than managerial tasks. In this case, Sarah would not be exempt from overtime pay because she does not pass the Job Duties Test.

Alex, the Software Engineer

Take Alex, a software engineer in your tech firm, earning $100,000 annually. He has no managerial tasks but focuses on coding and software development. Although his work is specialized and intellectual, allowing him to pass the Job Duties Test, his consistent salary and high annual earnings also exempt him from overtime pay.

Mark, the Assistant Manager

Then there’s Mark, an assistant manager at your restaurant earning $50,000 yearly. He handles managerial tasks like scheduling but doesn’t have significant decision-making powers. Despite being close to the administrative category, he doesn’t meet the Job Duties Test criteria and would thus be considered non-exempt.

Are Salaried Employees Entitled to Breaks in California?

When it comes to the topic of breaks, especially in California, there’s again a haze of misunderstanding surrounding salaried employees.

Many employers assume that a salaried status somehow negates the necessity for regular breaks. This misconception can lead to unintentional labor law violations.

Yes, salaried employees in California are entitled to breaks. The specifics can vary depending on whether the employee is classified as exempt or non-exempt.

Meal Breaks: A Right for Most, Including Exempt Employees

According to California break laws, nearly all employees are entitled to unpaid, 30-minute meal breaks if they work more than five hours a day and a second 30-minute break if they work over 10 hours. 

This right extends to exempt employees as well. During these breaks, employees should be free to leave the premises and must be entirely relieved of work responsibilities.

Rest Breaks: The Complexity for Exempt Employees

While most employees in California are entitled to rest breaks, exempt employees exist in a unique bracket here. California statutes show exempt employees are not automatically allowed to rest periods. 

This may depend on factors such as specific job duties and terms stipulated in the employment contract.

Do Salaried Employees Have to Clock In and Out in California?

When it comes to clocking in and out, salaried employees often find themselves surrounded by myths and half-truths. 

One prevalent myth is that salaried employees, particularly those classified as exempt, are free from the rigors of time-tracking. Let’s try to get to the bottom of it. 

The Law and Its Loopholes

In California, the law does not mandate salaried employees to clock in and out, especially those exempt. It’s mainly the employer’s call. 

However, it’s crucial to underscore that non-exempt employees — even those on a salary — must adhere to time-tracking requirements. Federal and state legislation compels employers to document the working hours of all non-exempt employees rigorously.

Why Clocking In and Out Makes Sense for Everyone in California

Given California’s pro-employee stance, the stakes for failing to meet legal obligations are significantly higher for employers in the state. As the law requires, employers must keep track of their employees’ working hours, including the exact clock in and out times and accurate break records. 

Accurate time tracking is a mutually beneficial practice. Employees are compensated fairly for their time, and employers minimize the risk of costly legal ramifications.

  • Overtime Accuracy. One of the most complicated aspects of employee management is the correct application of overtime rules. Failure to accurately track overtime for non-exempt salaried employees can lead to costly legal issues. Without precise time records, an employer might inadvertently violate the regulations stipulated by California law. Using a time tracking tool, such as Timeero, that includes California overtime settings ensures employers’ compliance with the strict legislature.

timeero california overtime settings
Timeero allows you to apply the California Overtime Rule for your staff's hours.

  • Breaks and Meal Times. Ensuring compliance with California break law becomes more straightforward using a compliant break tracking solution. For example, Timeero’s Daily Sign-off forms are an excellent way for employees in California to attest to their breaks. The records serve the employees and shield employers from legal disputes concerning break violations.

timeero daily sign off form
Employees can attest to their breaks using the Daily Sign-off form.

  • State-Specific Compliance. California’s labor laws are often stricter than federal requirements. Failure to comply can result in back pay, fines, and penalties. Accurate time records can serve as your first line of defense in an audit or lawsuit.

California Labor Law for Salaried Employees: Mileage and Expense Reimbursement

Following the California Labor Code 2802, employers must compensate workers for any business expense. This includes the costs associated with using a personal vehicle for work-related purposes.

There are several ways to calculate reimbursement: car allowance, reimbursement based on actual mileage, or reimbursement based on fixed and variable rates - FAVR. Regardless of the method, employees are entitled to full compensation. Many companies rely on the current IRS reimbursement rates.

A reliable mileage tracker, such as Timeero, can help employers track and compensate their employees accurately for the expenses incurred while using their cars for business purposes.

Equal Pay and Fair Pay: The Legal Imperatives in California

Equal work for equal pay is a legal and ethical concept that California employers must prioritize. Two pieces of legislation, the California Equal Pay Act and the Fair Pay Act, have made this topic non-negotiable.

California’s Equal Pay Act prohibits employers from paying employees less than their counterparts of the opposite sex for substantially similar work. 

The Fair Pay Act extends this by adding layers of accountability concerning race and ethnicity. 

Therefore, employers in California are obligated to offer equal pay for “substantially similar work,” not just identical job titles. Violating these laws can result in substantial legal consequences, including fines and back pay.

Shining a Light on Pay: California’s Transparency Rules

Pay attention if you’re an employer in California with a workforce of over 15 people. The state laws aren’t just about ticking a legal box. They also set the tone for your corporate culture.

According to California’s pay transparency laws under Senate Bill 1162, employers with more than 15 employees are mandated to include a salary range in all job postings. The pay transparency rule aims to minimize wage discrimination and offer a transparent view to job applicants.

PRO TIP: Transparency in salaries doesn’t just meet legal stipulations; it builds a culture of trust. Clearly outlining pay scales in job postings doesn’t only keep you compliant, but it also attracts the right talent by setting realistic expectations upfront.

How Can Timeero Help Me Comply with California Labor Laws for Salaried Employees?

Navigating the California labor law requirements is no easy task. Knowing about California employers and the workforce’s main pain points in their everyday operations, we’ve tailored our GPS tracking tool to be simple and efficient.

So, how can Timeero transform your everyday practices and enable California labor law compliance?

  • Your salaried employees can use the Timeero mobile app to track their hours of work. With a simple clock in and out on the phone, the app automatically creates their time card and ensures smooth approval—no more chasing them around for timesheets, no more phone calls, manual edits, and everyday complications. 

timeero gps time clock
Use the Timeero app for smooth timesheet creation.

  • If your non-exempt salaried employees are working overtime, Timeero’s California Overtime settings will classify their working hours accordingly as overtime or double-time and list them on the timesheets properly. This means no more unpaid overtime and adequate proof in the case of wage and hour law claims.

timeero time reports
Easily keep track of overtime hours.

  • Timeero comes with the California Breaks tracker tool, so your employees can verify their meal and rest breaks effortlessly, without any hassle. If some of your employees are non-compliant, you will be notified immediately so that you can act accordingly and pay the meal premium on time.

  • Besides tracking their working hours, Timeero also tracks your employees’ mileage so that you can reimburse them for the expenses accurately. 

timeero timsheet admin view
View time and mileage for accurate reimbursement.

  • Timeero enforces numerous protections for your business. For example, the app can notify you when an employee reaches the overtime threshold so that you can have these expenses under your control. 

timeero segmented tracking
Timeero's Segmented Tracking feature: View an employee's workday at a glance.

Thanks to GPS technology, there are numerous ways you can ensure your employees are where they’re supposed to be while on the clock in a manner that is compliant with California GPS tracking laws.

Timeero may benefit your business in many additional ways, so check our Timeero review to learn more about them.

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