By Pamela L. Vartabedian and Justin T. Curley

Unlike its two conformist siblings—the licensed professional and learned professional exemptions—the “creative professional” exemption is an artsy rebel that does not depend on an employee’s professional field, advanced knowledge, or educational degree. Determining whether an employee meets the creative professional exemption involves a fact-specific inquiry regarding the exact nature of the work performed by the employee.

Who is an exempt creative professional?

Federal law: To qualify as an exempt creative professional under federal law, the employee must be compensated at least $455 per week and the employee’s “primary duty” must be the performance of work that requires invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.

California law: The California standard differs from the federal standard, and requires that the employee (1) receive a salary of no less than two times the state minimum wage for full-time employment (currently equivalent to $37,440 per year), (2) spend more than 50% of the time performing work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor, and (3) regularly exercise discretion and independent judgment in the performance of the job duties.

Just how creative must the work be?

Whether an employee is exempt as a creative professional turns on the extent of the invention, imagination, originality, or talent that the employee exercises. For example:
Continue Reading Let’s Get Creative: The Creative Professional Exemption

By John R. Giovannone and Hayley E. Macon

While its administrative and executive siblings often get more publicity, the “outside sales exemption” presents unique challenges for California employers, particularly those that employ large sales teams (even setting aside the administrative challenges surrounding cell phone and other business expenses).

California’s rationale for exempting outside sales personnel from overtime and similar wage-related requirements is straightforward:  “Outside sales[people] have historically been exempt ‘because ‘it’s very difficult to control their hours and working conditions. They set their own time, and they’re on the road, they call on their customers . . . . [R]arely do you know what they are doing on an hour-by-hour basis.’” DLSE Op. Ltr. (September 8, 1998).

But although the outside sales exemption reflects the difficulty of tracking hours in connection with sales activity, California still requires employers to know what hard-to-track sales employees are doing “on an hour-by-hour basis” to defend the application of that exemption.

Who is an exempt outside sales person?

Federal law:  Employees whose “primary duty” is making sales and who regularly work away from the employer’s place of business may be exempt from minimum wage and overtime pay requirements. 20 CFR § 541.500(a). This federal rule is often described as being a  “qualitative” test.

California law:  The California version of the outside sales exemption (Lab. Code § 1171) is peculiar, by federal standards. Like the federal rule, California’s exemption covers sales people who regularly work away from the employer’s place of business. But California imposes an additional “quantitative” requirement: the employee must spend most of the work day away from the employer’s place of business, engaged in sales activities. California also limits the exemption to sales people who sell tangible or intangible items, or obtain orders or contracts for products, services, or use of facilities. IWC Wage Order 1-2001(2)(j). As a result, California’s outside sales exemption is narrower than the federal exemption.

Why is the California definition problematic?
Continue Reading Get out there and sell! The Quantitative/Qualitative Outside Sales Problem

By Catherine Dacre, Emily Barker, and Matthew Mason

One would think that an employee would prefer being deemed a “professional.” But when faced with the possibility of receiving additional income, employees often argue to the contrary, claiming that their classification as a “professional” is incorrect.

Under both California and federal law, so-called “white collar” employees, including “professional” employees, are exempt from wage and hour laws concerning overtime payment and breaks. That is, if an employee meets the test for exemption, the employer pays her a set salary, rather than on an hourly basis, and is not required to pay overtime or provide meal and rest breaks, among other things.

However, employers must take care. If an employee who has been classified as exempt later successfully argues that she does not meet the professional exemption, the employer will be on the hook for unpaid overtime going back, potentially, for four years. Plus, the employer may face additional penalties for any missed meal and rest breaks (at a rate of one additional hour of pay per break), failure to keep accurate records, failure to issue accurate wage statements, and, for terminated employees, penalties that accrue each day (up to 30 days) during the time the employee was not paid all she was owed.

Such suits will likely only become more popular in the near future. In March of this year, President Obama issued a memorandum directing the Department of Labor to streamline overtime regulations and make more workers eligible for overtime under federal law. Specifically, he asked the Department to consider how the professional exemption could be simplified to address the changing nature of the American workplace.

So, What Makes A Professional A “Professional”?

The answer to this question is complex, and is different under California law and federal law. As such, an employee may meet the test for the professional exemption under federal law, but fail to meet the test under California law.

In addition, the answer varies depending on whether the employee works in a certified profession, or whether the employee is an artist, writer or in another creative field. Generally, the criteria depend on the types of work the employee does, the level of education or training required to perform the work, and the employer paying at a specified salary threshold.

Types of Work:

Federal Law: Under federal law, an employee is properly classified as an exempt professional when the primary duty is the performance of work requiring “advanced knowledge,” defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment.

The “advanced knowledge” must be in a field of science or learning, and must be customarily acquired by a prolonged course of specialized intellectual instruction.

California Law: In California, an employee may be an exempt professional in one of three ways:
Continue Reading Don’t Be An Amateur: Are Your “Professionals” Properly Classified?

By Tim Rusche, Jonathan Brophy and Jennifer Wiegley

It seems simple enough. You hire an employee as a manager, you call her a manager, you pay her like a manager – voila! You don’t have to pay overtime, right?  Not so fast.

Entrepreneurial lawyers and disgruntled employees frequently attack “exempt” classifications to recover overtime pay, missed rest break and meal period pay, and other penalties. To avoid being an easy target, it is critical that employers avoid common pitfalls (like reading this blog with less than rapt attention!) and take affirmative steps to protect the exemption.

The Test:

In addition to earning at least two times the minimum wage, generally speaking, the “executive exemption” requires employees to spend most (i.e., the majority) of their time on management tasks, to regularly exercise discretion and independent judgment, and to supervise at least two employees.  In addition, their recommendations for changes in employment status, like hiring and firing, must be given particular weight.

Common Pitfalls:

  1. Bigger Salaries Are Not Always Better.   Just because an employee receives a high salary does not make him or her exempt under California law.  Regardless of the size of salaries, employees still must meet the other requirements of the exemption.
  2. A Job Title By Any Other Name Would Smell As Sweet.  If an employee is not  actually performing managerial or related duties more than 50% of the time or meeting the other requirements of the exemption, neither an impressive job title nor a detailed job description will save the exemption.
  3. To Deduct, Or Not To Deduct, That Is The Question.  Employers cannot deduct from exempt employees’ salaries for poor performance, lack of work, or some kinds of missed work days.  Employers must consider alternatives to salary deductions for disciplinary measures in order to protect the exemption.
  4. Give Them An Inch And They Will Take a Mile. While discretion is the better part of valor, and the exercise of discretion and independent judgment is an essential element of the exemption, unfettered discretion can actually hinder an exemption defense.  Employers must allow exempt employees to exercise discretion, but when exempt employees are free to work as they please with zero oversight, employers can face an uphill battle when employees argue that they used their discretion to perform mostly nonexempt duties.
  5. Lean Is Good But Too Skinny Is Dangerous. While all businesses strive to run efficiently, employers should provide exempt employees sufficient resources so that they are not compelled to spend most of their time performing nonexempt work.
  6. Independent Contractors May Not Fit the Bill. Exempt employees must supervise at two least other employees. The supervision of independent contractors or employees of contractors may be attacked as insufficient.
  7. Allow Exempt Employees To Rule The Roost.  Oftentimes employers vest hiring and firing decisions in their Human Resources or other departments, or high atop the chain of command.  If an exempt employee’s recommendations regarding hiring and firing or other changes in employment status are regularly ignored, the employee may not qualify for the executive exemption.

Workplace Solutions:  How can you protect executive exemption classifications?  Below are a few tips:
Continue Reading It’s Not ALL About the Benjamins – What Really Makes an Exempt Executive

Co Authored by Jon Meer, Jonathan L. Brophy, and Brandon McKelvey 

The administrative exemption has been a hot area of litigation for a long time in California with all sorts of twists and turns in the California Supreme Court and Courts of Appeal over the last several years.  Unfortunately, the courts are still struggling with this exemption and have failed to provide clear guidance or clarity in this area.  As a result, plaintiffs’ lawyers continue to target the administrative exemption in individual wage hour actions as well as class actions.

So you have to ask yourself this:  Are you confident that you would be able to withstand an attack as to the exempt status of your employees who are classified as administratively exempt?

Even employers who carefully designate job classifications as exempt are subject to attack.  Employees may claim that, upon closer inspection, their work doesn’t meet the test for the exemption and that they are owed overtime and penalties for missed meal and rest breaks – a costly battle for employers to fight.

Employers, however, can implement some basic safeguards that will help proactively protect their exempt classifications in the event of a lawsuit.  Here are a few suggested steps that employers can put in place now that may help prevent a lawsuit or provide a solid defense in the event of a lawsuit:

1.     Require Self-Evaluations:  During your company’s review process, solicit employees’ self-evaluations in categories related to the exemption test.  Employers should consider including the following types of categories for employee self-evaluations:


Continue Reading Protecting The Administrative Exemption – Are You Ready For A Lawsuit?