WHO IS “EXEMPT” FROM OVERTIME? WHEN IS A SALARY NOT A SALARY?

In a decision last week, the Court of Appeal rejected an employer’s refusal to pay overtime to an employee, where the company paid a different amount each pay period depending on how many hours he worked during that period. In other words, he was not paid a “salary” that was the same amount each pay period.  Insurance adjuster Mark Negri always worked more than 40 hours per week and was paid $29 per hour for every hour worked—no overtime over 8 in a day, no overtime for over 40 in a week, because the company called him an “exempt” salaried employee.

The Court of Appeal said the employer had improperly categorized Mr. Negri as an “exempt” administrative employee.  Under the California Labor Code, managerial, professional, and administrative employees are exempt from overtime only if they are paid “a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.”

But the problem in Mr. Negri’s case wasn’t that his “salary” fell below this “two-times-minimum-wage  threshold.  The real problem was that the insurance adjuster’s payment schedule was not a “salary” at all, said the Court.  If he worked fewer hours he made less money than if he worked more hours.  This didn’t qualify as a salary, so the company had to pay Negri overtime pay for all hours worked over 8 in a day or 40 in a week.

If you or anyone you know is being paid a “salary” that bounces around based on how many hours they work, the employer may be violating overtime laws.  Also, unless the employer is paying a salary that provides at least twice the state minimum wage (so, currently, $16.00 per hour, or about $32,000 a year), there is no exemption from overtime.

The case is Negri v. Koning & Associates and you can read it here. Or contact a lawyer to discuss the situation.

By Ted Franklin

Legal Developments