A recently published California Court decision has offered clear guidelines to help employers with the often confusing issue of whether an employee qualifies for the administrative exemption to the overtime requirement. If an employer mis-classifies an employee as exempt, therefore not paying him/her overtime, the employer runs the risk of having to pay back overtime pay, interest, penalties, and attorney fees.

In Eicher v. Advanced Business Integrators, Inc., the court said an employee must satisfy ALL of the following five requirements to classify for the administrative exemption under California law:

1. Employee's Duties and Responsibilities. Administrative employees perform office or non-manual work directly related to the management policies or general business operations of the employer or customers. Here, it is important to distinguish between an administrative employee who performs this type of work, and production employees who do not. Production employees engage in an activity that constitutes the company's primary purpose, (i.e. the day-today business) and they are not exempt from overtime.

2. Customarily and Regularly Exercises Discretion and Independent Judgment.
   Administrative employees must have the authority or power to make an independent choice, free from immediate direction or supervision and with respect to matters of significance.

3. General Supervision. Administrative employees perform under only general supervision, or work along specialized or technical lines requiring special training, or execute, under only general supervision, special assignments and tasks, or regularly and directly assist a proprietor, manager, or exempt administrator.

4. Devotion of Time. Administrative employees must be engaged in the activities meeting the test for the exemption at least 50 % of the time.

5. Compensation. An administrative employee must earn a monthly salary equal to no less than twice the California minimum wage for a full-time employee.

What you should do: Before designating an employee as exempt, be sure to carefully review the actual duties and responsibilities of the person's position. Keep in mind that job titles reflecting administrative classifications alone may not reflect actual job duties and therefore, are of no assistance in determining exempt or nonexempt status. The actual determination of exempt or nonexempt status must be based on the nature of the actual work performed by the actual employee. If in doubt, err on the side of classifying the employee as non-exempt, and pay them overtime for all hours worked in excess of 8 hours per day or 40 hours per week.

If you have any questions regarding the classification of an employee, you should contact an experienced employment law attorney.

ESKRIDGE LAW may be contacted by phone (310/303-3951), by fax (310/303-3952), or by e-mail (geskridge@eskridgelaw.net.) Please visit our website at www.eskridgelaw.net.

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