Hiring employees is a necessity for most businesses. It is the employees that will help carry out the vision of the company founders by working daily to execute various tasks in an effort to meet established goals. However, many new companies make the common mistake of not properly classifying the people that they hire and not monitoring how their working conditions may change their classification.
Knowing the difference between exempt and nonexempt employees, as well as independent contractors, can make all the difference in being liable for a civil suit and running a thriving business.
Most employees are nonexempt. This means that per state and federal law, nonexempt employees are entitled to:
The minimum wage in California requires employers pay employees a minimum of $10.50 per hour if the company has up to 25 employees and $11.00/hour if the company has 26 or more employees. California is scheduled to increase the minimum wage every year on January 1st, until 2023.
Additionally, certain cities, counties, and municipalities have their own minimum wage rate set higher than the California minimum wage. This includes Los Angeles County, Santa Monica, Malibu, Oakland, and Pasadena.
California law states that an employee is entitled to overtime pay if they are classified as being, "nonexempt." Such employees must be paid one and a half times their regular rate of pay for all hours worked over 40 hours in a week or 8 hours in a workday and double their normal hourly rate for all hours worked in excess of 12 in a day.
Federal law states that nonexempt employees are to receive overtime pay for hours worked over 40 per workweek at a rate not less than one and one-half times the regular rate of pay. There is no limit on the number of hours employees 16 years or older may work in any workweek. The federal law does not require overtime pay for work on weekends, holidays, or regular days of rest unless the hour allotment is exceeded during that time.
In California, an employer may not have someone work for a period of more than five hours per day without providing that person with a meal period of not less than 30 minutes, except that if the total work period per day of the employee is no more than six hours, the meal period may be waived by mutual consent of both the employer and employee. A second meal period of at least 30 minutes is required if an employee works more than 10 hours per day.
An exempt status is usually applicable to three common white-collar positions falling in the area of professional, administrative, and executive.
- The Professional exemption applies to people who are licensed or certified by the State of California and are primarily engaged in the practice of one or more of the following professions: medicine, dentistry, law, engineering, optometry, architecture, accounting, teaching.
- The Administrative exemption applies to people who have duties and responsibilities that involve either performing office or non-manual work directly related to management policies or general business operations of the employer.
- The Executive exemption applies to people who have duties and responsibilities that involve the management of the company. Usually, these types of employees regularly manage two or more employees and have the ability to hire and fire those employees.
An independent contractor is self-employed and has a contract with a company to offer services in exchange for monetary compensation. Many companies would prefer to hire independent contractors since they are less expensive due to the company not having to abide by wage and labor laws, however, the lack of control a company is legally permitted to have over independent contractors can sometimes outweigh the cost factor. As a result, most people who work for a company are classified as employees.
To avoid the potentially catastrophic impact of a wage and labor lawsuit, contact Mohsen Parsa today. Having well-versed and skilled representation on your side will help to protect the company you worked so hard to build by making certain that your hiring practices are in compliance with the law.