My Work My Wages .com : Independent Contractor

Managers, Executives, Professionals & Artists

An employee who is employed as an administrator (manager), executive, professional, or an artist may not receive the protections of most of the California wage laws. However, employers often misclassify their employees as “exempt” from the wage laws in order to avoid providing employees with the benefits of such laws that they are otherwise entitled to. Determining whether en employee is exempt from the labor laws may turn on whether the employee customarily and regularly exercised discretion and independent judgment in performing her duties.

Executive Exemption

An executive is exempt from the overtime laws. A person employed in an executive capacity means any employee:

Whose duties and responsibilities involve the management of the enterprise in which he or she is employed or of a customarily recognized department or subdivision thereof; and
Who customarily and regularly directs the work of two or more other employees therein; and
Who 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; and
Who customarily and regularly exercises discretion and independent judgment; and
Who is primarily engaged in duties, which meet the test of the exemption.
An executive employee must also earn a monthly salary equivalent to no less than two times the state minimum wage for full-time employment. Full-time employment means 40 hours per week as defined in Labor Code Section 515(c)

Under California law, the term "primarily engaged in" means that more than one-half of the employee's work time must be spent engaged in exempt work. This differs substantially from the federal overtime law which simply requires that the "primary duty" of the employee falls within the exempt duties.

artist

Professional and Artistic Exemption

Professionals and Artists are also exempt from the overtime law protections. A person employed in a professional capacity means any employee who meets all of the following requirements:

Who is licensed or certified by the State of California and is primarily engaged in the practice of one of the following recognized professions: law, medicine, dentistry, optometry, architecture, engineering, teaching, or accounting, or
Who is primarily engaged in an occupation commonly recognized as a learned or artistic profession. "Learned or artistic profession" means an employee who is primarily engaged in the performance of:
1. Work requiring knowledge of an advance type in a field or 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 work that is an essential part of or necessarily incident to any of the above work; or
2. Work that is original and creative in character in a recognized field of artistic endeavor (as opposed to work which 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 or work that is an essential part of or necessarily incident to any of the above work; and
3. Whose work is predominantly intellectual and varied in character (as opposed to routine mental, manual, mechanical, or physical work) and is of such character that the output produced or the result accomplished cannot be standardized in relation to a given period of time.
Who customarily and regularly exercised discretion an independent judgment in the performance of duties set forth above.
Who earns a monthly salary equivalent to no less than two times the state minimum wage for full-time employment. Full-time employment means 40 hours per week as defined in Labor Code Section 515(c).

Regarding the requirement for the exemption to apply that the employee "customarily and regularly exercises discretion and independent judgment," this phrase means the comparison and evaluation of possible courses of conduct and acting or making a decision after the various possibilities have been considered. The employee must have the authority or power to make an independent choice, free from immediate direction or supervision and with respect to matters of significance. For the learned professions, an advanced academic degree (above the bachelor level) is a standard prerequisite.

For the artistic professions, work in a "recognized field of artistic endeavor" includes such fields as music, writing, the theater, and the plastic and graphic arts.

Administrative Exemption

A person employed in an administrative capacity means any employee:

Whose duties and responsibilities involve either:

The performance of office or non-manual work directly related to management policies or general business operations of his or her employer or his or her employer's customers, or
The performance of functions in the administration of a school system, or educational establishment or institution, or of a department or subdivision thereof, in work directly related to the academic instruction or training carried on therein; and

Who customarily and regularly exercised discretion and independent judgment; and
Who regularly and directly assists a proprietor, or an employee employed in a bona fide executive or administrative capacity, or
Who performs, under only general supervision, work along specialized or technical lines requiring special training, experience, or knowledge, or
Who executes, under only general supervision, special assignments and tasks, and
Who is primarily engaged in duties which meet the test for the exemption.
An administrative employee must also earn a monthly salary equivalent to no less than two times the state minimum wage for full-time employment. Full-time employment means 40 hours per week as defined in Labor Code Section 515(c).

Following are examples of employees who might qualify for the exemption if, and only if, they meet the criteria set forth above:

Employees who regularly and directly assist a proprietor or exempt executive or administrator. Included in this category are those executive assistants and administrative assistants to whom executives or high-level administrators have delegated part of their discretionary powers. Generally, such assistants are found in large establishments where the official assisted has duties of such scope and which require so much attention that the work of personal scrutiny, correspondence and interviews must be delegated.
Employees who perform, only under general supervision, work along specialized or technical lines requiring special training, experience or knowledge. Such employees are often described as "staff employees," or functional, rather than department heads. They include employees who act as advisory specialists to management, or to the employer's customers. Typical examples are tax experts, insurance experts, sales research experts, wage rate analysts, foreign exchange consultants, and statisticians. Such experts may or may not be exempt, depending on the extent to which they exercise discretionary powers. Also included in this category would be persons in charge of a functional department, which may even be a one-person department, such as credit managers, purchasing agents, buyers, personnel directors, safety directors, and labor relations directors.
Employees who perform special assignments under only general supervision. Often, such employees perform their work away from the employer's place of business. Typical titles of such persons are buyers, field representatives, and location managers for motion picture companies. This category also includes employees whose special assignments are performed entirely or mostly on the employer's premises, such as customers' brokers in stock exchange firms and so-called "account executives" in advertising firms.

Regarding the requirement for the exemption to apply that the employee "customarily and regularly exercises discretion and independent judgment," this phrase means the comparison and evaluation of possible courses of conduct and acting or making a decision after the various possibilities have been considered. The employee must have the authority or power to make an independent choice, free from immediate direction or supervision and with respect to matters of significance. With respect to the administrative exemption, this phrase has been most frequently misunderstood and misapplied by employers and employees alike in cases involving the following:

Confusion between the exercise of discretion and independent judgment, and the use of skill in applying techniques, procedures, or specific standards.
Misapplication of the phrase to employees making decisions relating to matters of little consequence.
Perhaps the most common misapplication is the application of the exemption to employees engaged in production aspects of the employer's business as opposed to administrative functions.

Caveat. As with any of the exemptions, job titles reflecting administrative classifications alone may not reflect actual job duties and therefore, are of no assistance in determining exempt or nonexempt status. The fact that an employee may have one of the job titles listed above is, in and of itself, of no consequence. The actual determination of exempt or nonexempt status must be based on the nature of the actual work performed by the individual employee.

Other Exemptions

The following categories of employees are also exempt from the overtime laws: hourly computer software professionals, government employees, outside salespersons, interstate drivers regulated by the federal government, certain union employees, taxicab drivers, student nurses, some airline employees, carnival ride operators, commercial fishing boat crew members, professional actors, motion picture projectionists, TV announcers, editors and engineers, personal attendants, irrigators, and babysitters for minor children. Employees whose earnings exceed one and one half times the minimum wage and more than half their compensation represents commission are also exempt from overtime protection.

Independent Contractors

An independent contractor will not ordinarily be entitled to the same benefits as an employee. Sometimes, employers misclassify their employees as independent contractors to avoid providing them with benefits they are entitled to under the labor laws.

Misclassifications

In recent years many employers have reclassified their workers as "independent contractors" to avoid the costs of workers compensation and overtime pay associated with employment of workers classified as employees. There are myriad consequences to employers for misclassification of employees as independent contractors and managers including penalties from government agencies, liability for overtime premium, meal period pay, and other remedies available to employees under the Labor Code and Orders of the Industrial Welfare Commission, exposure for tort liability for injuries suffered by employees when workers compensation insurance is not secured, exposure for unfair business practices, tax liability and penalties and even criminal liability.

To determine whether a worker an an employee or an independent contractor, several factors must be considered: acts that show whether the business has a right to direct and control. An employee is generally told by his employer (1) when, where, and how to work, (2) what tools or equipment to use, (3) what workers to hire or to assist with the work, (4) where to purchase supplies and services, (5) what work must be performed by a specified individual, and (6) what order or sequence to follow. An employee may be trained to perform services in a particular manner. Facts that show whether the business has a right to control the business aspects of the worker’s job include: (1) The extent to which the worker has unreimbursed expenses; (2) The extent of the worker’s investment; (3) The extent to which the worker makes services available to the relevant market; (4) How the business pays the worker; and (5) The extent to which the worker can realize a profit or loss; Facts that show the type of relationship include: (1) Written contracts describing the relationship the parties intended to create; (2) Whether the worker is provided with employee-type benefits; (3) The permanency of the relationship; and (4) How integral the services are to the principal activity.