Tuesday, November 29, 2022

Part-Time Employees May Qualify as Exempt; 2-Part Test to Decide

Can I classify an employee who works only part-time as exempt?

An employee’s exempt classification must be evaluated by the employee’s rate of pay and the duties he/she performs, not necessarily by the number of hours worked.

An employee who meets the salary test requirements and is primarily engaged in exempt duties may be properly classified as exempt.

Salary Test Requirements

Under California Labor Code Section 515, most “white collar” exempt employees must “earn a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.”

For purposes of the minimum exempt salary level only, the code states that full-time employment is 40 hours per week. (Note though that employers are free to set their own definition of full-time work for other purposes, such as entitlement to vacation accrual and holiday pay.)

Based on the current two-tier California minimum wage, for businesses with 25 or fewer employees, the annual exempt salary minimum is $45,760 ($3,813.33 per month), and for larger employers the minimum is $49,920 ($4,160 per month).

Labor Code Section 515 does not require that an employee actually work full-time hours in order to be exempt. However, regardless of the number of hours actually worked, the salary minimum stays the same and may not be prorated for work that is less than 40 hours per week.

A full-time exempt employee earning $50,000 per year who cuts back to 20 hours per week and has her salary prorated to $25,000 would not meet the minimum salary test and thus could not remain exempt.

There are a few exceptions to this minimum salary requirement for outside sales, computer professionals, and certain doctors.

Duties Test Requirements

Regardless of whether an employee works full-time or part-time, the employee must be “primarily engaged” in exempt duties, meaning he/she must spend more than 50% of his/her time engaged in those duties.

As an example, a licensed architect who wants to work only part-time hours can be classified as exempt as long as he/she primarily engages in architectural work and receives at least the full minimum required salary.

On the other hand, an exempt manager cutting back to part-time may not end up “primarily engaged” in managerial duties in the part-time role, because someone else in the company many need to take over more day-to-day management of workers. This would mean the manager may no longer meet the managerial duties test and therefore might not remain exempt.

Column based on questions asked by callers on the Labor Law Helpline, a service to California Chamber of Commerce preferred and executive members. For expert explanations of labor laws and Cal/OSHA regulations, not legal counsel for specific situations, call (800) 348-2262 or submit your question at www.hrcalifornia.com.

Staff Contact: Ellen Savage

Ellen Savage
Ellen Savage
Ellen Savage joined the CalChamber in 1990 and currently serves as an HR adviser. She has been assisting employers on the Helpline since 1993. She was the editor of eight editions of the California Labor Law Digest and author of the CalChamber's California Hiring to Termination Guide. Her experience also includes practicing at a large Sacramento law firm and presenting at dozens of employment law seminars statewide. She holds a J.D. from Lincoln Law School.

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