This page contains the following information:

• Executive Exemption Test
• ‘Customarily and Regularly Exercises Discretion and Independent Judgment’ Defined for the Executive Exemption
• ‘Primarily Engaged In’ Defined for the Executive Exemption
• Examples of Exempt Duties for an Executive
• Examples of Nonexempt Duties for an Executive
• Working Managers
• Supervising Two or More Employees

Executive Exemption Test

To determine if an employee is exempt, consider the duties they perform as well as salary. An executive employee is exempt from overtime pay if they meet all of the following requirements :1

• Has duties and responsibilities involving the management of the enterprise in which they are employed or of a customarily recognized department or subdivision;
• Customarily and regularly directs the work of two or more other employees;
• Has the authority to hire or fire other employees, make meaningful suggestions and recommendations relating to the hiring or firing and advancement and promotion or any other change of status of other employees;
• Customarily and regularly exercises discretionary powers (For more information, see“Discretion and Independent Judgment” in Determining Exempt or Nonexempt Status and“‘Customarily and Regularly Exercises Discretion and Independent Judgment’” Defined for the Executive Exemption in Executive Exemption);
• Is “primarily engaged” in duties that meet the tests explained in this section (For more information, see “‘Primarily Engaged’ In Defined for the Executive Exemption” in Executive Exemption); and
• Earns a monthly salary equivalent to no less than two times the state minimum wage for full-time employment. For purposes of exempt salary requirements, full-time employment is defined as 40 hours per week.2 You can find the current rate in the Exempt Analysis Worksheet - Executive Managerial Exemption. For more information, see“Minimum Salary for Exempt Employees” in Determining Exempt or Nonexempt Status.

All of these requirements must be met even if the employee is in “sole charge” of an establishment.

‘Customarily and Regularly Exercises Discretion and Independent Judgment’ Defined for the Executive Exemption

For the executive exemption to apply, the employee must “customarily and regularly exercise 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 executive exemption, the most frequent cause of misapplication of the phrase “discretion and independent judgment” is the failure to distinguish discretion and independent judgment from the use of independent managerial skills. “An employee who merely applies his or her memory in following prescribed procedures or determining which required procedure out of the company manual to follow, is not exercising discretion and independent judgment.”3

‘Primarily Engaged In’ Defined for the Executive Exemption

For the purposes of the executive exemption, “primarily engaged in” means that more than one-half of the employee’s work time is spent engaged in exempt work. An exempt employee must spend more than 50 percent of their time doing:

• Exempt duties
• Work that is directly and closely related to exempt work
• Work properly viewed as a means for carrying out exempt functions

Some examples of work that is directly and closely related to exempt work include:

• A manager prepares a management policy memo on a computer and emails it to another manager at a branch office. The typically nonexempt duties of typing and emailing would likely be considered exempt duties because they are directly and closely related to the exempt function of creating the policy and communicating it to another manager.
• During a busy time at a retail store, a customer knocks several glass jars off a shelf. Typically, a clerk would be assigned to clean up the mess. But, upon seeing all the clerks busy with other customers, a manager grabs a broom and sweeps away the mess, so no one steps on broken glass and gets hurt. Although sweeping broken glass is typically a nonexempt duty, in this case it could be properly viewed as directly and closely related to carrying out the manager’s exempt function of providing for the safety of the employees, customers and property.

Examples of Exempt Duties for an Executive

Exempt duties must be directly and closely related to managerial work, such as:

• Interviewing, selecting and training employees
• Setting, adjusting or recommending pay rates and work hours
• Directing work
• Keeping production records of subordinates for use in supervision
• Evaluating employees’ efficiency and productivity
• Handling employees’ complaints
• Disciplining employees
• Planning work
• Determining work
• Distributing work
• Deciding on types of merchandise, materials, supplies, machinery or tools
• Controlling flow and distribution of merchandise, materials and supplies
• Providing for the safety of employees and property

Examples of Nonexempt Duties for an Executive

Examples of nonexempt duties that a supervisor might perform include:

• Performing the same type of work as subordinates
• Performing any production work not part of a supervisory function, although not like the work performed by subordinate employees
• Making sales, replenishing stock or returning stock to shelves, except for supervisory training or demonstration
• Performing routine clerical duties such as bookkeeping, cashiering, billing, filing or operating business machines
• Checking and inspecting goods as a production operation rather than as a supervisory function
• Performing maintenance work

However, some otherwise nonexempt duties could be considered exempt if they relate directly and closely to exempt work and can be viewed as a means for carrying out exempt functions.

Working Managers

“Working manager” refers to an employee with managerial responsibilities and a managerial title who is primarily engaged in nonexempt duties, such as cooking, selling on the floor, cashiering, pumping gas, keeping records, taking care of patients or acting as a desk clerk. Working managers are often misclassified as exempt. Employers should closely analyze the actual job duties of such working managers to determine if they spend more than 50 percent of their time engaged in exempt activities.

Some examples of working managers that are often classified as exempt but may, in fact, be nonexempt include those in:

• Service stations
• Restaurants
• Rest homes
• Branch retail stores
• Motels

Assistant managers and trainees are usually nonexempt. They do not customarily and regularly direct the work of other employees; they share the responsibility instead. They focus on learning the position and do not perform the duties of the exempt position on a regular basis.

Apartment managers usually fall into the nonexempt classification. However, if the facility and staff are large enough, an apartment manager may meet the duties test for an exempt executive.

For more information, see “‘Primarily Engaged In’ Defined for the Executive Exemption” on this page.

Supervising Two or More Employees

The IWC Orders require as a basic condition for the executive exemption that the manager must supervise two or more employees. This may be one full-time and two half-time employees. The Labor Commissioner cautions employers that, when reviewing classifications, it has been the Labor Commissioner’s experience that a managerial employee supervising as few as two employees rarely spends as much as 50 percent of their time primarily engaged in managerial duties.4

• If an employee supervises only two or three other office employees, the main responsibilities and duties of the supervising employee are often directed toward performing nonexempt functions. Although these functions may require more skill than those functions performed by subordinates, they may be routine office work or bookkeeping that is nonexempt work.

1. DLSE Enforcement Policies and Interpretations Manual sec. 53.6.2.1