California's tough exemption tests go beyond job titles

For California employers, the correct classification of employees as either exempt or non-exempt remains one of the most perilous compliance challenges. Misclassification can expose a business to significant liability, including back wages, substantial penalties and costly litigation. Given that California law presumes an employee is non-exempt, attorneys must advise clients on the high standard of proof required to classify an employee as exempt.

The legal framework in California is significantly more restrictive than the federal Fair Labor Standards Act. Courts interpret exemptions to overtime narrowly, and the burden rests entirely on the employer to prove that an employee's role fits within a specific exemption's criteria. This principle was firmly established in Ramirez v. Yosemite Water Co., Inc., 20 Cal. 4th 785 (1999) and continues to guide judicial review of classification disputes.

The two-part test for exemption

To qualify for the primary executive, administrative or professional exemptions, an employee must satisfy both a stringent salary test and a detailed duties test.

First, the salary basis test requires that the employee earns a monthly salary equivalent to at least two times the state minimum wage for full-time employment. With California's minimum wage set at $16.50 per hour in 2025, this equates to a minimum annual salary of $68,640. This salary must be a predetermined amount, not subject to reduction based on the quality or quantity of work performed.

Second, and more complex, is the duties test. California employs a strict, quantitative analysis: An employee must be "primarily engaged in" exempt work, meaning they spend more than 50% of their time performing exempt tasks. This differs substantially from the federal standard, which uses a more qualitative "primary duty" test. An employee's job title or a written job description is not determinative; the focus is on the actual tasks performed day-to-day. The court in Heyen v. Safeway, Inc., 216 Cal. App. 4th 795 (2013) reinforced this by holding that managers who spent most of their time on non-exempt tasks like stocking shelves did not qualify for the executive exemption, despite their titles.

Criteria for key exemptions

Under the duties test, each exemption has specific criteria that must be met for more than 50% of the employee's work time:

The executive exemption

The employee must manage the enterprise or a recognized department, direct the work of two or more other employees, and have the authority to hire or fire, or provide recommendations on such matters that are given particular weight.

The administrative exemption

The employee must perform office or non-manual work directly related to management policies or general business operations of the employer or its customers. Critically, this work must involve the customary and regular exercise of discretion and independent judgment on matters of significance. This exemption is not a catch-all for salaried employees performing routine or clerical work.

The professional exemption

This category applies to those licensed by California in professions such as law, medicine or engineering, or to those in "learned or artistic" professions. A learned professional's work must require advanced knowledge customarily acquired by a prolonged course of specialized intellectual instruction. An artistic professional's work must be original and creative, depending primarily on invention, imagination or talent.

Risks of misclassification

The consequences for misclassification are severe. An employer may be liable for years of unpaid overtime wages, plus an additional hour of pay for each workday a compliant meal or rest break was not provided. Furthermore, failure to pay all wages due upon termination can trigger "waiting time" penalties of up to 30 days of the employee's pay. This exposure is magnified by the Private Attorneys General Act, which allows employees to sue on behalf of the state to collect civil penalties for Labor Code violations. Cases like Rodriguez v. Parivar, Inc. (2022) serve as a reminder that courts will hold employers liable for failing to conduct a diligent review of an employee's actual job duties.

To mitigate these risks, employers should conduct regular audits of all exempt positions, using detailed questionnaires to document the actual work being performed. Job descriptions must be accurate and reflect reality, not aspiration. Given the complexity and the high stakes involved, consulting with experienced employment counsel before making classification decisions is a critical and necessary step for all California employers.