Just Because You Are Paid a Salary Does Not Mean You Are Automatically Exempt from Receiving Overtime Pay

When ZHE asks its clients whether they have been properly receiving overtime compensation at their job, a common response we hear is, “I am not entitled to overtime pay because I am paid a salary.”

No matter the origin of this commonly held myth, it is not accurate.  Under California law, exemptions from statutory mandatory minimum wage and overtime provisions are narrowly construed.  One of the more common categories of exemptions apply to those persons employed in the “administrative, executive, or professional” capacity.  This is likely the category from which the “salary” myth was derived, as it constitutes one (of three) elements that must be met in order to be exempt (often referred to as the “salary basis test”).  To be exempt under this category, an employee must: (1) be “primarily engaged in duties that meet the test of the exemption; (2) “customarily and regularly exercise discretion and independent judgment in performing those duties; and (3) earn “a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.”   In other words, in addition to the other elements, to be exempt you must be paid a salary of at least $2,733.33 per month.

In sum, because you are paid a salary, does not automatically mean you are exempt from overtime and minimum wage compensation.