Hourly or salaried employees?

Many employers feel that it is better for both the employee and the employer to pay the employee a set salary, rather than an hourly wage. The idea is that the salary will be constant and predictable, and that it will be high enough to compensate for any overtime the employee might work. Many employees like this arrangement much better than being paid hourly, both for emotional and financial reasons. The problem is that under California and U.S. law, overtime pay is required for any employee who is non-exempt, whether they are paid a salary or not. The issue of whether overtime is due, then, does not depend on whether the employee is paid a salary, but rather on whether the employee is properly classified as exempt.

There are not many exemptions, and those that do exist are technical and not very intuitive. There are others, but the main three exemptions are professional, administrative and executive. None of these exemptions should be applied based on their names alone. For example, many employees think of themselves as “professional”, but that does not mean they are exempt under the professional exemption. If the employer makes a mistake and classifies a non-exempt worker as exempt, and if there is a lawsuit on that subject, the employer will have the burden disprove the amount of overtime hours the employee claims to have worked (and it is very hard to prove a negative). Also, if the employee worked any overtime for which she was not compensated, the employer may have to pay, in addition to the wages owed, penalties, high interest, and attorneys’ fees for itself and the employee too. The bottom line is that employers should be very careful when classifying their employees as exempt or non-exempt, because the price of making a mistake can be very high. —Adam Treiger