The Misclassification of Salaried Employees

When Is a Salaried Employee Properly Considered Non-Exempt?

California law provides a host of protections to “non-exempt” employees, such as strict rules governing overtime pay and meal and rest breaks, which are severely curtailed when the employee is “exempt.” The distinction between non-exempt and exempt employees is critical for California employers because improperly classifying an employee as exempt almost inevitably leads to violations of the Labor Code. That is, because the employee was incorrectly treated as exempt, the employer has almost certainly failed to pay overtime, provide meal and rest breaks, or issue compliant pay statements.

California’s wage and hour laws include several provisions that categorize employees as exempt. This article examines one such provision, which is frequently litigated, namely the exemption for executive, administrative, or professional (“EAP”) employees.

Historical Roots of California’s Executive, Administrative, or Professional Exemption

California’s wage and hour laws are codified both in the state’s Labor Code and in the wage orders promulgated by the Industrial Welfare Commission (“IWC”). The IWC was first established in 1913 by the California legislature to regulate the wages, hours and working conditions of women and children in furtherance of their “health and welfare.” (Industrial Welfare Com. v. Superior Court (1980) 27 Cal.3d 690.) Early IWC wage orders  contained no exemption for administrators or executives, and only one wage order contained an exemption for professionals. (Bell v. Farmers Ins. Exchange (Cal. App. 2001) 87 Cal.App.4th 805.)

The modern version of the EAP exemption traces its roots not to California law, but to federal law. Following the Great Depression, Congress enacted the Fair Labor Standards Act (“FLSA”), the federal wage and hour law, in June 1938. As initially enacted, the FLSA included an exemption for employees “employed in a bona fide executive, administrative, professional” capacity, language that mirrors the current FLSA and California EAP exemptions. (The Fair Labor Standards Act: A Historical Sketch of the Overtime Pay Requirements of Section 13(a)(1), Congressional Research Service, Aug. 28, 2007.) Congress did not explicitly define what it meant to be employed in a “bona fide executive, administrative, professional” capacity, however, leaving this task to the Wage and Hour Division of the Department of Labor. The first regulation issued under Section 13(a)(1) required executives and administrators, to be properly classified as such, to have the “primary duty” of “management of the establishment.” The term “professional” was characterized by work that was “predominantly intellectual and varied in character as opposed to routine mental, manual, mechanical or physical work” and was to involve “discretion and judgment both as to the manner and time of performance, as opposed to work subject to active direction and supervision.” A distinction between hourly and salaried employees was not mentioned, except insofar as executives and administrators were to be paid at least $30 per workweek.

The subsequent history of the federal EAP exemption reveals several themes that remain relevant today, including under California law. The regulations have sought to strike a balance between administrability and accurately capturing the type of “white collar” employees originally envisioned by the exemption. While a salary basis requirement was eventually added, salary alone has never been a sufficient proxy for an EAP employee. Salaries for a single position may vary widely across different regions of the United States, or between rural and urban areas. A salary level fixed by a regulation will also, over time, come to capture an increasing number of employees due to the effects of wage inflation. This creates the incentive for employers to reclassify hourly positions as salaried to obtain the EAP exemption and avoid paying for overtime work. Since salary alone cannot determine the EAP exemption, employers, employees, and the courts are left to wrestle with a more ambiguous “duties” test. With the passage of time, this test must be applied to new jobs that do not fit neatly into the statutory or regulatory language, further muddying the waters.

Exempt From What?

California’s current EAP exemption is contained in the Labor Code, the IWC Wage Orders, and the case law interpreting the exemption. Multiple provisions of the Labor Code state that they do not apply to exempt employees and refer to the IWC Wage Orders for further clarification regarding the scope of the exemption. The case law, in turn, interprets the Labor Code and IWC Wage Orders in the context of specific cases.

Before turning to the scope of each of the exemptions, it will be helpful to clarify what precisely the exempt employee is exempt from, and which California labor laws still apply to the employee despite the exemption.

The Labor Code states that EAP employees are exempt from the following provisions:

·       Overtime (Labor Code § 515(a))

·       Meal and Rest Breaks (Labor Code § 226.7(e))

·       Itemized Wage Statements – Requirement that wage statement show total hours worked by the employee (Labor Code § 226(j))

The IWC Wage Orders generally state that EAP employees are exempt from sections 3 through 12 of a given order, which cover the following regulations:

·       Overtime (§ 3)

·       Minimum Wages (§ 4)

·       Reporting Time Pay (§ 5)

·       Licenses for Disabled Workers (§ 6)

·       Recordkeeping (§ 7)

·       Wage Deductions for Cash Shortages and Breakage (§ 8)

·       Uniforms and Equipment (§ 9)

·       Meals and Lodging (§ 10)

·       Meal Breaks (§ 11)

·       Rest Breaks (§ 12)

However, the IWC Wage Orders generally do not exempt EAP employees from sections of the order other than sections 3 through 12, including the following:

·       Change Rooms and Rest Facilities (§ 13)

·       Seating (§ 14)

·       Temperature (§ 15)

·       Elevators (§ 16)

·       Posting of Order (§ 22)

Similarly, the Labor Code itself does not exempt EAP employees from a variety of code provisions, including:

·       Itemized Wage Statements – Requirements other than total hours worked (Labor Code § 226)

·       Paid Sick Days (Labor Code § 246)

·       Business Expense Reimbursement (Labor Code § 2802)

·       Indemnity for Employer’s Negligence (Labor Code § 2800)

·       Payment of All Wages Due to Discharged or Quitting Employees (Labor Code §§ 201-203)

·       Timing of Payments – Salaries may be paid monthly as opposed to bi-weekly (Labor Code § 204)

·       Unlawful Wage Deductions (Labor Code § 221)

·       Paid Vacation Accrual (Labor Code § 227.3)

In sum, even when the EAP exemption applies, it is not an exemption from the entirety of the Labor Code or the IWC Wage Orders.

The Scope of the EAP Exemption

Determining whether an employee qualifies as executive, administrative, or professional for purposes of the exemption requires a two-prong test. Employers bear the burden of proving both prongs, namely the salary basis prong and the duties prong, and the exemption is narrowly construed. (Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785, 794.)

First Prong: Salary Basis

The simpler of the two prongs is the requirement that the employee be paid on a salary basis. The dollar amount of the salary must be “equivalent to no less than two times the state minimum wage for full-time employment,” i.e., employment at 40 hours per week. (Labor Code § 515; IWC Wage Orders § 1.) Even if the employee’s compensation exceeds this threshold, the payment must be in the form of a salary, defined as a fixed rate of pay that does not vary with the employee’s productive output or hours worked. (Negri v. Koning & Assocs. (Cal. App. 2013) 216 Cal.App.4th 392, 397.)

Deductions from the employee’s salary may cause the employer to fail the salary basis test and render the employee non-exempt. For instance, while deductions from pay may be permitted for absences of one day or more which occur for personal reasons other than sickness or disability, pay may not be deducted for absences lasting less than a full day. (Conley v. Pacific Gas and Elec. Co. (Cal. App. 2005) 131 Cal.App.4th 260, 267.)

Second Prong: Duties

In addition to receiving a salary that exceeds the statutory threshold amount, the EAP employee must perform the duties of an executive, administrative, or professional. This is the more complex of the two prongs in edge cases, as it seeks to fit a wide variety of occupations and duties into categories written into law nearly one hundred years ago—and as discussed above, the prong was often difficult to administer even when it was originally drafted.

The Labor Code states that this prong is satisfied in the context of overtime “if the employee is primarily engaged in the duties that meet the test of the exemption” and “customarily and regularly exercises discretion and independent judgment in performing those duties.” (Labor Code § 515.) The IWC Wage Orders similarly require that an EAP employee be “primarily engaged” in the executive, administrative, or professional function and exercise “discretion and independent judgment” in carrying out these functions, and further define what it means to be an executive, administrative, or professional employee in three separate tests.

Executive. An executive employee is further defined in the IWC Wage Orders as one whose “duties and responsibilities involve the management of the enterprise in which they are employed or of a customarily recognized department or subdivision thereof” who “customarily and regularly directs the work of two or more other employees therein” and “has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring or firing and as to the advancement and promotion or any other change of status of other employees will be given particular weight.”

A bona fide executive employee must also be “primarily engaged in duties which meet the test of the exemption.” To determine whether a given work activity qualifies as exempt, the IWC Wage Orders incorporate the following regulations under the Fair Labor Standards Act effective as of the date of the order: 29 C.F.R. Sections 541.102, 541.104-111, and 541.115-116. Notably, because the IWC Wage Orders were last issued in 2001, they incorporate the historical 2001 versions of the FLSA regulations, without regard to any recent changes in the regulations.

The July 1, 2000 version of 29 C.F.R. § 541.102 states that “[i]n the usual situation the determination of whether a particular kind of work is exempt or nonexempt in nature is not difficult. In the vast majority of cases the bona fide executive employee performs managerial and supervisory functions which are easily recognized as within the scope of the exemption.” The regulation then pronounces that “it is generally clear that work such as the following is exempt work when it is performed by an employee in the management of his department or the supervision of the employees under him: Interviewing, selecting, and training of employees; setting and adjusting their rates of pay and hours of work; directing their work; maintaining their production or sales records for use in supervision or control; appraising their productivity and efficiency for the purpose of recommending promotions or other changes in their status; handling their complaints and grievances and disciplining them when necessary; planning the work; determining the techniques to be used; apportioning the work among the workers; determining the type of materials, supplies, machinery or tools to be used or merchandise to be bought, stocked and sold; controlling the flow and distribution of materials or merchandise and supplies; providing for the safety of the men and the property.”

Sections 541.104 to 541.111 of the July 1, 2000 version of 29 C.F.R. § 541 further expand on the characteristics that distinguish an exempt executive employee from a non-exempt employee. Section 541.104 states that the employee’s “managerial duties must

be performed with respect to the enterprise in which he is employed or a customarily

recognized department or subdivision thereof,” meaning the management of a recognized business unit with a continuing function. This requires the supervision of at least two full-time employees “or the equivalent.” (29 C.F.R. § 541.105.) The executive must also have the authority to hire or fire employees and “customarily and regularly exercise discretionary powers.” (29 C.F.R. §§ 541.106-107.)

Certain business activities that would ordinarily be characterized as non-exempt work may qualify as managerial if they are “closely associated with the performance” of the executive’s managerial and supervisory functions. The regulation provides the example of a manager in a small organization who also keeps the records of subordinates’ working time—a function that might be performed by a non-exempt employee in a larger organization. (29 C.F.R. § 541.108.) In contrast, by way of example, the preparation of payroll documents never qualifies as exempt work, even if performed by the purported executive, because “the preparation of a payroll does not aid in the supervision of the employees or the management of the department.” (Id.) The performance of non-exempt duties in emergencies or on occasion similarly does not cause a forfeiture of the exemption. (29 C.F.R. §§ 541.109-110.)

The July 1, 2000 version of 29 C.F.R. § 541.115 states that the “primary purpose of the exclusionary language placing a limitation on the amount of nonexempt work” (a section not expressly incorporated into the IWC Wage Orders) “is to distinguish between the bona fide executive and the ‘working’ foreman or ‘working’ supervisor who regularly performs ‘production’ work or other work which is unrelated or only remotely related to his supervisory activities.” The “working foreman or working supervisor most commonly found in industry works alongside his subordinates” and such “employees, sometimes known as strawbosses, or gang or group leaders perform the same kind of work as that performed by their subordinates, and also carry on supervisory functions.” Finally, § 541.116 states that employees training to become executives do not qualify for the exemption.

The IWC Wage Orders do not incorporate the C.F.R. sections discussing the quantity of managerial work that must be performed for the executive exemption to attach. Instead, the Wage Orders state that “[t]he work actually performed by the employee during the course of the workweek must, first and foremost, be examined and the amount of time the employee spends on such work, together with the employer’s realistic expectations and the realistic requirements of the job, shall be considered in determining whether the employee satisfies this requirement.”  The evaluation of the quantity of exempt work performed must consider “the realistic requirements of the job”; “how the employee actually spends his or her time”; and “whether the employee’s practice diverges from the employer’s realistic expectations, whether there was any concrete expression of employer displeasure over an employee's substandard performance, and whether these expressions were themselves realistic given the actual overall requirements of the job.” (See Ramirez v. Yosemite Water Co., Inc. (Cal. 1999) 20 Cal.4th 785.) And for purposes of overtime, the exemption explicitly requires that “more than one-half of the employee’s worktime” be spent on exempt duties. (Labor Code § 515(e).)

Administrative. The IWC Wage Orders define an administrative employee in the following manner:

·       The employee’s duties involve either the “performance of office or non-manual work directly related to management policies or general business operations of their employer or their employer’s customers” or the administration of a school system or subdivision thereof “in work directly related to the academic instruction or training carried on therein” and

·       The employee “customarily and regularly exercises discretion and independent judgment” and

·       The employee satisfies one of the following criteria: (1) the employee “regularly and directly assists a proprietor, or an employee employed in a bona fide executive or administrative capacity”; (2) the employee “performs under only general supervision work along specialized or technical lines requiring special training, experience, or knowledge”; or (3) the employee “executes under only general supervision special assignments and tasks” and

·       The employee is “primarily engaged in duties that meet the test of the exemption,” with the “activities constituting exempt work and non-exempt work” construed in the same manner as certain federal regulations in effect as of the date of the order, i.e., July 2001. The IWC Wage Orders further define the “primarily engaged” requirement as follows: “Exempt work shall include, for example, all work that is directly and closely related to exempt work and work which is properly viewed as a means for carrying out exempt functions. The work actually performed by the employee during the course of the workweek must, first and foremost, be examined and the amount of time the employee spends on such work, together with the employer’s realistic expectations and the realistic requirements of the job, shall be considered in determining whether the employee satisfies this requirement.”

The IWC Wage Orders incorporate the July 2000 versions of 29 C.F.R. Sections 541.201-205, 541.207-208, 541.210, and 541.215 to define the exempt and non-exempt work of an administrative employee. In summary, those regulations provide as follows:

Section 541.201 identifies three types of employees who may qualify as administrative. The first is the assistant to a proprietor or to an executive or administrative employee, such as an executive assistant to the president, confidential assistant, executive secretary, or, in retail or service establishments, assistant manager or assistant buyer. The second is the staff employee, as distinguished from the line employee. This category includes advisory specialists to management (for example, tax experts, wage-rate analysts, investment consultants, and statisticians) as well as persons in charge of a “functional department,” which may be a one-person department (for example, credit managers, purchasing agents, buyers, safety directors, personnel directors, and labor relations directors). The third is the employee who performs special assignments, whether away from the employer’s place of business (such as lease buyers and field representatives of utility companies) or inside it (such as account executives in advertising firms and customers’ brokers in stock exchange firms). The regulation cautions that job titles are not a reliable guide: “[t]itles can be had cheaply and are of no determinative value,” and exempt status depends on whether the employee’s actual duties, responsibilities, and salary satisfy every requirement of the test. (29 C.F.R. § 541.201.)

Section 541.202 sorts the work that administrative employees perform into three categories: (1) work of the kind the administrative test itself describes, which is clearly exempt; (2) routine work that is directly and closely related to that work, which is also exempt, and which includes routine work that necessarily arises out of the administrative duties, routine work without which the more important work cannot be performed properly, and routine tasks that are functionally related to the administrative duties; and (3) routine work that is unrelated or only remotely related to the administrative duties, which is non-exempt. “Routine work” in this context means work that does not require the exercise of discretion and independent judgment. The regulation also explains that “academic administrative” work is limited to administration of the academic operations of a school, so that jobs relating to building maintenance or to the health of students and staff, such as social workers, psychologists, lunch room managers, and dietitians, fall outside it. (29 C.F.R. § 541.202.)

Section 541.203 explains that the requirement of office or non-manual work limits the exemption to “white-collar” employees. If the work is office work, it is immaterial whether it is manual or non-manual in nature, and persons employed in the routine operation of office machines are engaged in office work, although they would not qualify as administrative employees because they do not meet the other requirements. The administrative employee may perform some manual work that is directly and closely related to the work requiring discretion and independent judgment. But an employee who performs so much manual work other than office work that he or she is not basically a white-collar employee does not qualify, even if that manual work is directly and closely related to the exempt work. Employees who spend most of their time using tools, instruments, machinery, or other equipment, or performing repetitive operations with their hands, are not bona fide administrative employees no matter how much skill their work requires. (29 C.F.R. § 541.203.)

Section 541.205 addresses the requirement that the work be “directly related to management policies or general business operations.” That phrase describes the administrative operations of a business, as distinguished from “production” work or, in a retail or service establishment, “sales” work, and it limits the exemption to employees who perform work of substantial importance to the management or operation of the business. The administrative operations of a business include work by white-collar employees engaged in “servicing” the business, such as advising management, planning, negotiating, representing the company, purchasing, promoting sales, and business research and control. The employee need not participate in formulating management policy. The phrase also reaches employees who carry out major assignments in conducting the operations of the business, or whose work affects business operations to a substantial degree, even if their assignments relate to only a particular segment of the business. The regulation concedes that no specific rule can identify the precise point at which work becomes substantially important, but it offers examples on both sides of the line. A bank cashier, a tax consultant, an industrial buyer, a credit manager, a claims adjuster, and a statistician who analyzes data and draws conclusions that determine policy generally satisfy the test. A bank teller, bookkeepers, secretaries and clerks (who hold the “run-of-the-mine positions in any ordinary business”), a messenger entrusted with large sums of money, a statistician who merely tabulates data, and an inspector do not. The fact that other employees perform identical work does not affect the analysis so long as each employee’s work is of substantial importance. The regulation also recognizes that the relevant management policies or business operations may be those of the employer’s customers, so that advisers and consultants employed by a firm that furnishes such services for a fee may qualify. Finally, systems analysts and computer programmers who are concerned with the planning, scheduling, and coordination of activities required to develop systems for processing data to solve complex business, scientific, or engineering problems are doing work directly related to management policies or general business operations. (29 C.F.R. § 541.205.)

Section 541.207 defines “discretion and independent judgment” as involving the comparison and evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered. The term implies that the employee has the authority to make an independent choice, free from immediate direction or supervision, with respect to matters of significance. The regulation draws several distinctions. First, discretion and independent judgment must be distinguished from the use of skill in applying techniques, procedures, or specific standards. An employee who merely applies knowledge in following prescribed procedures, determines which procedure to follow, or determines whether specified standards are met is not exercising discretion and independent judgment, even if there is some leeway in reaching a conclusion. The regulation’s examples include inspectors, examiners and graders, personnel clerks who screen applicants against standards set by others, and employees who perform comparison shopping and report their findings to a buyer. Second, the decisions must be “real and substantial,” meaning that they concern matters of consequence, rather than the kinds of decisions normally made by clerical and similar employees. The employee need not formulate policy or commit the employer financially, however, and the regulation includes administrative assistants who act without specific instructions and buyers, customers’ brokers, and certain wholesale salesmen who have reasonable latitude in negotiating on behalf of their employers. Third, the decisions need not be final. They may consist of recommendations, and the fact that they are subject to review, or are occasionally revised or reversed, does not defeat the exercise of discretion and independent judgment.

Section 541.207 further distinguishes the exercise of discretion from cases in which serious loss results from an employee’s negligence, failure to follow procedures, or improper application of skills, such as a bank teller who credits the wrong account or a machine operator who presses the wrong button. Those employees are not exercising discretion and independent judgment. The exercise of discretion must also occur “customarily and regularly,” a frequency greater than occasional but possibly less than constant, so that the occasional exercise of discretion is not enough. For data processing employees, the regulation states that a systems analyst exercises discretion and independent judgment when developing methods to process business information, that whether a computer programmer does so depends on the facts of each case, and that tape librarians, keypunch operators, computer operators, junior programmers, and programmer trainees are so closely supervised as to preclude the required discretion. (29 C.F.R. § 541.207.)

Section 541.208 illustrates which routine work is “directly and closely related” to exempt administrative work and is therefore itself exempt. For instance, for a management consultant, taking notes on the flow of work through a client’s office and plant, personally typing the report, and drawing a proposed table of organization are exempt because they are directly and closely related to the consultant’s analysis, even though they could be delegated to non-exempt employees. By contrast, drafting tables of organization proposed by other consultants because of a special skill in that work is routine work only remotely related to the exempt duties and is non-exempt. (29 C.F.R. § 541.208.)

Section 541.210 provides that the administrative exemption does not extend to employees who are training for employment in an administrative capacity but are not actually performing the duties of an administrative employee. (29 C.F.R. § 541.210.) Sections 541.201(c) and 541.215 address “academic administrative” personnel. To be considered for the exemption, such an employee must be employed in connection with the operation of an elementary or secondary school system, an institution of higher education, or another educational establishment or institution, and the exemption is available regardless of whether the school is public or private or operated for profit or not for profit. Employees engaged in overall academic administration include superintendents, principals and vice principals, and department heads, and special schools for mentally or physically handicapped or gifted children are included. (29 C.F.R. §§ 541.201(c), 541.215.)

As with the executive exemption, the IWC Wage Orders do not incorporate the federal regulation that quantifies the amount of non-exempt work an administrative employee may perform, Section 541.209 (which sets a limit of 20 percent of hours worked, or 40 percent in a retail or service establishment), or the federal discussion of “primary duty” in Section 541.206. Whether an employee spends enough time on exempt work is instead governed by the California workweek analysis and the more-than-one-half standard of Labor Code § 515(e) discussed above.

The California case law interpreting the administrative exemption frequently cites the “administrative/production worker dichotomy,” a test developed in federal cases construing the FLSA, as a method of identifying a bona fide administrative employee. Under this test, the court distinguishes between administrative employees and employees who produce the business’s core product or carry out its core service. However, the California Supreme Court has cautioned that the test and “other sources” should only be consulted if courts cannot determine whether the exemption applies based on the “particular facts before them” and the “language of the statutes and wage orders at issue.” (Harris v.  Superior Court of Los Angeles Cnty. (Cal. 2011) 53 Cal.4th 170.)

Professional. The IWC Wage Orders define a professional employee as one who satisfies the following criteria:

·       The employee must be “licensed or certified by the State of California” and primarily engaged in the practice of “law, medicine, dentistry, optometry, architecture, engineering, teaching, or accounting” or an occupation “commonly recognized as a learned or artistic profession.” A “learned or artistic profession” is one that either requires “knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study, as distinguished from a general academic education and from an apprenticeship, and from training in the performance of routine mental, manual, or physical processes” or which involves “original and creative” and “intellectual” work, the output of which “cannot be standardized in relation to a given period of time.”

·       The employee must be one who “customarily and regularly exercises discretion and independent judgment in the performance” of the aforementioned duties.

The IWC Wage Orders further define the duties that characterize a “learned or artistic profession” with reference to the relevant C.F.R. provisions in effect as of the date of the order. Those C.F.R. provisions are as follows:

Section 541.207, which also applies to the administrative exemption, defines “discretion and independent judgment” as the comparison and evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered, with the authority to make an independent choice, free from immediate direction or supervision, with respect to matters of significance. As summarized above, the regulation distinguishes discretion from the mere use of skill in applying prescribed procedures or standards, requires decisions that are “real and substantial” rather than concerning matters of little consequence, does not require that decisions be final, and requires that discretion be exercised customarily and regularly rather than occasionally. (29 C.F.R. § 541.207.)

Section 541.301(a) through (d) elaborates on the “learned” professions, which are those requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study, as distinguished from a general academic education, an apprenticeship, and training in the performance of routine mental, manual, or physical processes. The regulation breaks that definition into three elements. First, the knowledge must be “of an advanced type,” which generally means knowledge that cannot be attained at the high school level. Second, it must be knowledge in a “field of science or learning,” which distinguishes the professions from the mechanical arts, where the knowledge may be fairly advanced but is not in a field of science or learning. Third, the knowledge must be “customarily” acquired by a prolonged course of specialized intellectual instruction and study. The word “customarily” means that in the vast majority of cases the specific academic training is a prerequisite for entrance into the profession. The exemption therefore remains available to the occasional lawyer who did not attend law school or the occasional chemist without a chemistry degree, but it does not reach quasi-professions such as journalism, in which the bulk of employees acquired their skill by experience rather than formal specialized training. (29 C.F.R. § 541.301(a)-(d).) The Wage Orders incorporate only subsections (a) through (d) of Section 541.301, and not the remaining subsections, which discuss specific occupations such as nurses, accountants, and teachers.

Section 541.302 elaborates on the “artistic” professions, which require work that is original and creative in character in a recognized field of artistic endeavor, as opposed to work that can be produced by a person endowed with general manual or intellectual ability and training, and the result of which depends primarily on the invention, imagination, or talent of the employee. Recognized fields include music, writing, the theater, and the plastic and graphic arts. Musicians, composers, conductors, soloists, actors, singers, painters, and cartoonists who are given only a title or concept ordinarily qualify, while copyists, animators of motion-picture cartoons, and retouchers of photographs do not. In the field of writing, essayists, novelists, scenario writers, and persons holding the more responsible writing positions in advertising agencies generally qualify. The regulation treats radio and television announcers and journalists as fact-specific. Announcers who act as masters of ceremonies, conduct interviews, or ad lib commentary on current events generally perform exempt work, while announcing station identification, time signals, and program names is non-exempt. Newspaper writers ordinarily do not qualify as “learned” professionals and are exempt, if at all, as artistic professionals, which requires writing that is analytical, interpretative, or highly individualized, as with editorial writers, columnists, critics, and top-flight writers of analytical and interpretative articles. Reporting the news, rewriting stories, and routine editorial work are non-exempt, although interviewing or investigation that is an essential part of and necessarily incident to creative work, such as a drama critic’s interview of an actor, need not be counted as non-exempt. (29 C.F.R. § 541.302.)

Section 541.306 addresses the requirement that the work be “predominantly intellectual and varied in character as opposed to routine mental, manual, mechanical, or physical work.” The test looks to the type of thinking the employee must perform. A physician may perform many similar examinations in a morning, and a chemist may run a series of similar tests, but each requires judgment and a continual variety of interpretation because the problems presented and the deductions to be made vary. The regulation observes that the “work of the true professional is inherently varied even though similar outward actions may be performed.” It contrasts a professional medical technologist, who performs complicated chemical, microscopic, and bacteriological tests, with the laboratory assistants and technicians who generally perform the simple, routine, and preliminary tests, and it notes that X-ray technicians have only limited opportunity for the exercise of independent discretion and judgment because they usually work under the supervision of a more highly qualified employee. (29 C.F.R. § 541.306.)

Section 541.307 explains that work that is “an essential part of and necessarily incident to” professional work is itself exempt, even though it may include routine physical tasks that are also performed by non-exempt employees. For example, a chemist performing important and original experiments may find it necessary to perform some menial tasks personally even though they could be assigned to laboratory assistants, and a teacher may conduct pupils on a field trip related to classroom work, drive the school bus, and monitor the pupils in public restaurants. The regulation emphasizes that this test differs from the one applicable to executive and administrative employees. Routine work is exempt for those employees if it is “directly and closely related” to their exempt duties, but work that is directly and closely related to professional duties is not exempt unless it is also an essential part of and necessarily incident to the professional work. A teacher who drives a school bus each day at the beginning and end of the school day to pick up and deliver pupils, for instance, is performing non-exempt work. (29 C.F.R. § 541.307.)

Section 541.308 cautions that employment in a professional field does not by itself establish the exemption. Some employers erroneously believe that anyone employed in accountancy, engineering, or another professional field qualifies, but the exemption of an individual depends on his or her duties and other qualifications. The exemption does not cover all employees of professional employers, all employees in industries having large numbers of professionals, or all employees in any particular occupation. Nor does it cover persons who are learning a profession, or persons with professional training who work in professional fields but perform subprofessional or routine work. The regulation’s examples include trained librarians who do not perform professional work and employees with “engineer” titles who are in fact trainees, junior engineers, or draftsmen. (29 C.F.R. § 541.308.)

Section 541.310 provides that the professional exemption applies to an employee employed in a bona fide professional capacity and does not include trainees who are not actually performing the duties of a professional employee. (29 C.F.R. § 541.310.)

As with the executive and administrative exemptions, the IWC Wage Orders do not incorporate the federal regulation that limits the amount of non-exempt work, Section 541.309, which restricts work that is not an essential part of and necessarily incident to the exempt work to 20 percent of the time worked in the workweek. The quantity of exempt work is again governed by the California standard described above.

This article is for informational purposes only, does not constitute legal advice, and does not create an attorney-client relationship.