“Wage and Hour Law” refers to laws pertaining to payment of minimum wage, payment and timing of wages, commissions, overtime and vacation, rest periods, meal periods, make up time, alternative work week schedules, travel time pay, show up time pay, time
keeping requirements, itemized wage statements, penalties for failing to provide or comply with the foregoing and a host of other detailed rules relating to “working conditions” of your labor force.
The starting point is the key distinction between “exempt” and “non-exempt” employees. Exempt employees as the name implies are not subject to the vast majority of wage and hour laws. Most notably these include California laws pertaining to payment of overtime and the requirement to provide rest and meal periods.
There are three exemptions
under California law: Executive, Administrative and Professional, each with their own separate detailed requirements. And no – simply paying your employee a salary does not magically make them exempt. While that is a requirement for exempt status there are additional requirements.
Both the “salary” test and the “duties” test must be met, otherwise your employee is non-exempt. Under California law, the “duties” test requires the employee be “primarily engaged” in exempt duties, including exercise of “independent discretion and judgment.” The employee must engage in exempt duties more than 50% of the time, based on actual measurement of time. The federal test of whether the employee’s “primary duties” consist of exempt duties is less strict. An employee may be exempt under federal law, but not California law.
Many employers, including large employers, misclassify their employees as exempt when they are really non-exempt. The consequences are potentially devastating (see “group” actions). Just ask Farmers Insurance Exchange, Sav-On Drugstores, Microsoft, Intel, WalMart, FedEx, UPS, IKEA, IBM, Long’s Drugs Stores, Abercrombie & Fitch, Bed Bath and Beyond, Verizon, Radio Shack, Wells Fargo Bank, Starbucks, Borders, to name a few, all of whom have been hit with huge wage and hour class action lawsuits since 2000.
Misclassifying your employees as exempt and/or failing to follow wage and hour rules for non-exempt employees can cost your business a lot of money. And you don’t have to be Wal-Mart.