Administrative Exemption Under California Labor Laws- Are you Misclassified?

Industrial Welfare Commission, ICW Wage Order No. 4, and California Labor Code Section 515 lays out the requirements which must be complied with to classify an employee as exempt from applicable labor laws. For an employee to be exempt from these rules as a bona fide “administrator,” all the following criteria must be met and the Employers have the burden of proving that:

(a) The employee must perform office or non-manual work directly related to management policies or general business operation of
                 the employer; and,
(b) The employee must customarily and regularly exercise discretion and independent judgment; and,
(c) The employee must regularly and directly assist a proprietor or an exempt administrator; or,
(d) The employee must perform, under only general supervision, work requiring special training, experience, or knowledge, or,
(e) The employee must execute special assignments and tasks under only general
supervision; and,
(f) The employee must be primarily engaged in duties which meet the test of exemption.

Executive Exemption under California Labor Law

The Industrial Welfare Commission, ICW Wage Order No. 4, and Labor Code §515, sets forth the requirements which must be complied with to classify an employee as exempt from applicable labor laws. For an employee to be exempt from these rules as a bona fide “executive,” all the following criteria must be met and Employers have the burden of proving that:

(a) The employee’s primary duty must be management of the enterprise, or of a customarily recognized department or subdivision;
                and,
(b) The employee must customarily and regularly direct the work of at least two or more other employees; and,
(c) The employee must have the authority to hire and fire, or to command particularly serious attention to his or his recommendations
                on such actions affecting other employees; and,
(d) The employee must customarily and regularly exercise discretion and independent judgment; and,
(e) The employee must be primarily engaged in duties which meet the test of exemption.

If you think that you or your fellow employers currently are or formerly were misclassified as exempt from overtime wages based on the executive exemption, you may be entitled to overtime wages for all of the hours you worked. It does not matte if your employer classified you as an exempt salaried employee if you were misclassified. Visit http://www.bamlawca.com for further information on the executive exemption.

California Professional Exemption From Overtime

The Industrial Welfare Commission, ICW Wage Order No. 4, and Labor Code §515,
set forth the requirements which must be complied with to classify an employee as exempt from applicable labor laws. For an employee to be exempt from these rules as a bona fide “professional,” all the following criteria must be met and the Employers have the burden of proving that:

(a)     The employee is primarily engaged in an occupation commonly recognized as a learned or artistic profession. For the  
          purposes of this subsection, “learned or artistic profession” means an employee who is primarily engaged in the  
          performance of:

 (1)        Work requiring knowledge of an advanced type in a field or science or learning customarily acquired
  by a prolonged course of specialized intellectual instruction and study, as distinguished from a
 general academic education and from an apprenticeship, and from training in the performance of
  routine mental, manual, or physical processes, or work that is an essential part or necessarily                                      
  incident to any of the above work; or,

(2)      Work that is original and creative in character in a recognized field of artistic endeavor, 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 incident to any of the above work; and, (3) Whose work is predominately intellectual and varied in character as opposed to routine mental, manual, mechanical, or physical work) and is of such character cannot be standardized in relation to a given period of time;

(b) The employee must customarily and regularly exercise discretion and
independent judgment; and,

(c) The employee earns a monthly salary equivalent to no less than two (2) times the state minimum wage for full-time employment.

If you think that your current or former employer may have misclassified you as exempt from overtime based on the professional exemption, contact Blumenthal, Nordrehaug & Bhowmik now by calling (858) 551-1223 for a free consultation. You may be entitled to recover your overtime wages plus damages, regardless of whether or not you were paid a salary.

Technicians and troubleshooting Employees May Be Entitled to Overtime In California

Employees in technician positions performing services in the field that have been given titles like "field technician", "service technician", 'technician'', "service engineers", "service professional", "customer service engineer", or "installation and customer solution engineers" may be exempt from overtime under the California labor code despite the fact that the employer classifies them as exempt.

The duties that are performed by these technician employees primarily involve
the day to day labor to maintain, repair, troubleshoot, build and monitor equipment for their employer. The duties for these employees also sometimes require the performance of non-office, manual labor, including but not limited to carrying, lifting, bending and repairing, and the physical installation and maintenance of security, computer, electrical, software, and/or hardware components and parts. As a matter of course, technical problems often arise with this equipment at all hours of the day and at all hours of the night.
Responding to these problems and maintenance demands are not only performed throughout the normal workday, but also pursuant to an on-call policy in many cases. These employees may still be responsible to respond to calls and perform troubleshooting work to resolve the problems at issue during specified on-call work hours. All of these job duties performed by the technicians are non-exempt job duties under California law and federal law. In many cases, these technician employees perform these functions, and all duties, according to established company policies, protocols, and procedures.

A History of the California Labor Code

An examination of the Labor Code's history and infrastructure is necessary to fully understand Arias and its implications. The California Legislature has a wide field of discretion to determine the scope of the employer-employee relationship.  Its goal is to foster peace and order through regulations designed to ensure wholesome conditions of work and freedom from oppression.  To ensure that employers do not develop an extreme position of power over employees, the Legislature permits employees to pursue two remedies, and perhaps a third, in the event that the employer violates the Labor Code.
    First, employees may recover the wages that they earn through performing labor.  The California and federal courts adhere to the principle that wages are not ordinary debts; they are preferred over all other claims due to the economic position of the average worker and his or her dependence on the regular payment of wages for the necessities of life.  In other words, under California law, wages are jealously protected for the benefit of employees.  As such, the second remedy employees may pursue is a statutory penalty that is available in addition to the wages.  Given the high emphasis of protecting employees, the statutory penalty is intended to deter employers from committing wage and hour violations.  Finally, the third remedy is a civil penalty that is assessable by the state.  Historically, only the state, and not employees, could recover civil penalties through an enforcement action initiated by California's Labor Commissioner.  For the Labor Code to function properly, the state needs to have the ability to assess a civil penalty for wage and hour violations because these violations lead less payroll tax money and interest for the state.
    The California Court of Appeal's decision in Caliber Bodyworks  best illustrates how the three remedies in the Labor Code function. An employer is potentially liable for all three remedies for a single Labor Code violation.  For example, suppose an employer discharges an employee. The wages earned and unpaid at the time of discharge are due and payable immediately.  If the employer's failure to pay the wages is deemed to be willful, the employee can recover a statutory penalty in addition to the wages plus interest.  Additionally, the state is permitted to initiate an enforcement action against the employer to recover civil penalties.
     In theory, the imposition of three separate penalties for a single violation of the Labor Code ought to deter employers from operating outside of the law. Nonetheless, practice has proved the Labor Code's triple threat of remedies to be inadequate since California lacks the necessary funding and resources to vigorously pursue civil penalties.  "Although innovative labor law education programs and self-policing efforts by industry watchdog groups may have some success in educating some employers about their obligations under state labor laws, in other cases the only meaningful deterrent to unlawful conduct is the vigorous assessment and collection of civil penalties as provided in the Labor Code."  Absent the fear of civil penalties recoverable by the state in addition to statutory penalties and wages recoverable by employees, employers gain an incentive to operate in California's underground economy.

California's Underground Economy

    Though Lawmakers recognize the positive connotations of mobilizing the underground economy to combat the budget deficit, the underground economy appears to be indestructible. From 1990 to 2003 California exhausted significant resources and time to avert wage and hour violations.  Nevertheless, California's efforts were futile due to the exponential growth of California's workforce and inadequate state funding and resources. In 2003, lawmakers noticed that its failure to deter businesses from violating wage and hour laws set off a minor budget deficit. The deadly combination of the underground economy and budget deficit compelled California to declare, "adequate financing of essential labor law enforcement functions is necessary to achieve maximum compliance with state labor laws in the underground economy and to ensure an effective disincentive for employers to engage in unlawful and anticompetitive business practices."  With insufficient state resources and nowhere else to turn, lawmakers called in the people for reinforcements in the war against the underground economy by enacting the Labor Code Private Attorneys General Act of 2004 ("PAGA").   The PAGA deputizes any "aggrieved employee on behalf of himself or herself and other current or former employees" to initiate actions for wage and hour violations on behalf of California.  Bear in mind that California receives seventy five percent of any judgment in favor of the employees, with twenty five percent going right into the state's general fund.   Still, despite its theoretical brilliance, courts were confused as to whether representative actions initiated under the PAGA had to satisfy conventional class action requirements.   This confusion foiled the PAGA's potential to strike underground employment activity on a grand scale.

Scenarios to Erase California' Whopping Budget Deficit

The most harmonious way to erase California's budget deficit is to exterminate the state's underground economy. Official state reports emphasize that the underground economy causes California to lose a whopping six and a half billion dollars each year just in unreported taxable wage income.  Once California implements an effective program to collect the substantial taxable wage income it loses annually, revenues will be realized directly through additional taxes, penalties and interest, and indirectly through voluntary compliance and the resulting fair competition.   Suppose California had collected that money each year for the past ten years. Despite the national recession, the state would currently enjoy a five billion dollar budget surplus rather than a sixty billion dollar deficit. Furthermore, proper wage and tax payments are linked to fair competition.  The fair competition, in turn, would render California better equipped to manage an economic disaster like a national or a global recession. This option, as opposed to the budget plans dangerous tax hikes and spending cuts, is preferable in that it kills two birds with one stone; that is, it mobilizes California's silent but deadly underground economy to combat the more recent and imminent budget deficit.