Many times, it makes more sense for an employer to pay an employee a flat salary instead of an hourly wage.
A salary is a norm in many professions and trades. Dollar for dollar, salaried employees are perceived to make more than their hourly counterparts.
Moreover, a salary is supposed to be a mutually beneficial thing. An employer avoids mandatory overtime on exempt salaried employees, and the employee presumably is done when they have performed assigned duties. In other words, an employee is not bound to the time clock.
Both federal law and California law place restrictions on an employer’s ability to avoid overtime simply by paying a flat salary. In practice, an employer in this state cannot simply exempt an employee from overtime on the employer’s say-so.
These restrictions keep employers from using salaries to get around overtime pay that their employees in all fairness deserve.
Executive, administrative employees may be exempt if they are paid enough
California’s laws actually offer broader protections to employees than the federal rules. In other words, under California law, it is harder for employers to exempt an employee from overtime than it might be in other states.
For example, executive, administrative and professional employees must meet several requirements before being declared exempt, even if their employer pays a salary. The mere fact that an employee supervises other workers also is not enough to qualify for an overtime exemption.
Importantly, to qualify for an exemption, the employee’s salary must be at least twice California’s minimum hourly wage for a 40-hour week. After 2023, when the state’s minimum wage will be $15 an hour for all employees, the minimum salary for the exemption will be $62,400 per year.
Employers in Santa Monica and the greater Los Angeles area should be careful to review the rules and apply them correctly before declaring a salaried employee exempt from overtime requirements.
Employees who feel they have been deprived of overtime due to misclassification or some other reason may have legal options available to them.