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:
- He or she is licensed or certified in California in one of eight specified professions: law, medicine, dentistry, optometry, architecture, engineering, teaching, or accounting; or
- He or she is in a learned or artistic profession typically requiring extensive specialized education; or
- He or she is in a learned or artistic profession that involves original and creative work in which the employee’s unique talents are essential to the job.
The second and third criteria also require the employee’s work be predominantly intellectual and varied in character (i.e. not standardized, routine, manual, etc.)
A detailed discussion of the application of these criteria is beyond the scope of this post. Suffice it to say that unless an employee is in one of the certified professions, whether the exemption will apply to an individual depends on the particular circumstances and requires thoughtful and informed analysis.
Salary Tests: Both California and federal law have salary tests, but again they are different.
Federal Law: Under the federal exemption, an employee meets the salary basis, generally, if she earns not less than $455 per week and is paid on a salary basis. These salary requirements do not apply to outside sales employees, teachers, and employees practicing law or medicine.
California Law: In California, an employee must earn at least two times the California minimum wage on a weekly basis.
The best protection for an employer is to audit exempt positions to assure they meet the tests for exemption. Such an audit should include:
- Reviewing job descriptions for exempt duties. Assure job descriptions are both an accurate representation of what the employee is expected to do and that those duties meet the tests for exemption.
- Confirming actual work being performed. It is not sufficient to assume that exempt employees are performing the duties as expected. The employee’s manager(s) should be interviewed, and performance reviews and sometimes work product should be reviewed.
- Do not rely on job titles. No matter how impressive the title, if the employee’s job duties are not exempt in nature, it will not be enough to confer exempt status on the employee.
Even one misclassified employee can be an expensive mistake. But when a Plaintiff’s attorney attacks an employer’s blanket classification of many employees as “professionals,” the risk to employers can be huge.