If You’re Not Salaried, You’re Not Exempt

Although most of the focus in determining whether an employee is exempt from the requirements of overtime and meal and rest periods is usually focused on the duties the employee performs, California’s Sixth Appellate District recently reminded us that there is another, equally important factor to consider.  To be “exempt,” an employee must be paid “a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.”

“Salary” does not necessarily mean what it sounds like: a fixed weekly, monthly, or yearly amount.  It can include many different kinds of pay, so long as a portion of the employee’s pay is fixed and equal to at least twice the minimum wage.  For instance, if an employer and employee agree that the employee will earn $20 per hour with a guaranteed minimum of $640 a week regardless of the hours worked, the employee can be considered salaried.  However, even if the employee gets $50 an hour so that he or she only has to work a few hours a week to equal $640 if there is no guarantee of a minimum income, the employee is not salaried.

That was the case in Negri v. Konig & Assoc.  The Court considered whether a highly compensated employee could be exempt when his pay was based solely on the number of hours worked.  Even if he always worked enough hours to meet the twice-the-minimum-wage requirement, because the employee was not guaranteed a minimum of at least $640 a week, he could not be exempt.  The employer’s mistake was a costly one:  it could now owe the employee for hundreds of hours of overtime.