Can I Classify Any Employee as Exempt?

It may be tempting to classify an employee as exempt to sidestep overtime and other wage-and-hour headaches—but in California, every employee is presumed non-exempt (hourly) by default. An employee can only be classified as exempt/salaried once they satisfy both the salary test and one of the recognized duties-based exemptions.

Start With an Exempt Analysis Worksheet

The best first step is to complete an Exempt Analysis Worksheet. CEA members can access these on our website, and they'll walk you step by step through the salary and duties analysis.

As you work through the worksheet, keep two requirements in mind:

• Duties test: Exempt employees must spend more than 50% of their time on qualifying exempt duties.
• Salary test: For 2026, exempt employees must earn at least $70,304/year — calculated as two times the state minimum wage ($16.90/hour) multiplied by 2,080 hours per year. In 2027, the minimum salary will increase to $72,384.

FAQs for Exempt Employees

If an exempt employee works part-time or variable hours, can we pro-rate or reduce their salary?

No. The hallmark of exempt status is that the employee is paid for the skills they bring to the role — not the number of hours worked. To maintain exempt status under the white-collar exemptions (executive, administrative, and professional), the employee must receive their full salary for any workweek in which they perform any work. This is the “salary basis” rule. So, when an exempt employee is out for part of the week or works fewer hours, start from the assumption that they still receive their full salary.

There are a few narrow exceptions that permit deductions from an exempt employee's salary for qualifying full-day absences. We cover this in more detail in our exempt employee deductions fact sheet.

Can we require exempt employees to work specific hours?

You sure can! Many employers assume that because exempt employees aren't paid by the hour, they can't be assigned a set schedule. Not true — employers can assign designated shifts and/or required hours of availability to exempt employees. For example, if your business operates Monday–Friday, 9am–5pm, you can require exempt employees to be present and working during those hours. You can also call them in outside of those hours without triggering overtime, as long as they're properly classified.

Do we have to pay expense reimbursements to exempt employees?

Yes, the same rules apply. Exempt employees are exempt from most wage-and-hour requirements, but not all of them. Business expense reimbursement is one of the exceptions. Labor Code section 2802 requires employers to reimburse all employees — exempt and non-exempt alike — for reasonable and necessary business expenses required to do their job (e.g., office supplies, cell phone, internet). Don't forget mileage reimbursement when exempt employees use a personal vehicle for business travel, too.

Can we classify someone as a “salaried non-exempt” worker?

We do not recommend it. While the Labor Commissioner allows employers to pay non-exempt employees on a salaried basis, those employees remain hourly employees subject to all wage-and-hour requirements — minimum wage for all hours worked, overtime, meal and rest breaks, and so on. Hours worked must still appear on the pay stub, meaning salaried non-exempt employees still need to track their time to ensure accurate, compliant pay. This setup often complicates the regular rate of pay used for overtime calculations. Because of the added administrative burden and potential for confusion, we generally don't recommend paying non-exempt employees on a salaried basis.

Have additional questions? CEA members can contact our HR Support Team at 800.399.5331.

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This article is provided for general informational purposes and does not constitute legal advice. Consult qualified counsel for guidance specific to your organization.