Special Exemptions Classification Rules – Hawaii

In addition to the more typical “white collar” exemptions under both federal and state law (“Executive, Administrative, and Professional” exemptions), there are a number of special exemptions. This document provides guidelines about some of the more commonly used special exemptions.

SALES: In general, the exemptions available for salespersons fall into one of the two following categories. Please keep in mind, however, that these sales exemptions are often misunderstood and misused by employers. In addition, there is significant deviation between federal and state regulations involving these exemptions. The following summarizes how to exempt salespersons from both federal and state law.

An exempt OUTSIDE SALESPERSON must:

  • be employed for the purpose of, and who is customarily and regularly engagedawayfromtheemployer’splaceor places of business in: making sales or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; AND
  • not spend more than 40% of his/her weekly work hours performing tasks other than those described above. Work performed incidental to and in conjunction with the employee’s own outside sales or solicitations (i.e. booking appointments, drafting reports) is considered exempt if it does not exceed the stated 40% limit; AND
  • not spend more than 5% of his/her weekly hours on work unrelated to outside sales or solicitations.

An exempt INSIDE SALESPERSON must:

  • be guaranteed compensation totaling $2,000 or more per month; whether paid weekly, biweekly or monthly; AND
  • earn in excess of one and one-half times the federal minimum wage; AND
  • be employed by a retail or service establishment;
  • have more than 50% of his/her compensation for a representative period (not less than one month) be in the form of commissions of sales of goods or services.

An exempt COMPUTER PROFESSIONAL must:

  • be guaranteed compensation totaling $2,000 or more a month, whether paid weekly, biweekly, or monthly.
  • be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;
  • have as his/her primary duty:
    • The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; OR
    • The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; OR
    • The design, documentation, testing, creation or modification of computer programs related to machine operating systems; OR
    • A combination of the aforementioned duties, the performance of which requires the same level of skills.

No higher learning degree is required, although an individual who meets this exemption may have one. There is also no licensing or certification requirement, and any such license or certification alone will not guarantee this exemption.

The computer employee exemption does not include employees engaged in the manufacture or repair of computer hardware and related equipment. Employees whose work is highly dependent upon, or facilitated by, the use of computers and computer software programs (e.g., engineers, drafters and others skilled in computer-aided design software), but who are not primarily engaged in computer systems analysis and programming or other similarly skilled computer-related occupations identified in the primary duties test described above, are also not exempt under the computer employee exemption.

An exempt LEARNED OR CREATIVE PROFFESIONAL must:

  • be compensated at a rate of not less than $455 per week (which includes a fixed salary or fixed fee of not less than $210 per week); AND
  • have as his/her primary duty the performance of work that either:
  • requires advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction or 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. (“Learned Professional”); OR
  • 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 individual (“Creative Professional”); AND
  • perform work that is predominately 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; AND
  • consistently exercise discretion and independent judgment in the performance of the above duties.

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Exempt vs. Non-Exempt General Guidelines – Hawaii

Federal and state wage and hour laws require employers to pay minimum wages as well as overtime pay to some employees. Employees subject to these laws are called “non-exempt,” whereas employees to whom these provisions do not apply are called “exempt.” Distinguishing between these two classifications of employees is often not a simple job for an employer.

Important to remember:

  • Titles are irrelevant. Simply calling someone a “manager,” does not make him or her an exempt employee.
  • Paying someone a salary does not automatically make the employee exempt – nor does the amount of money you pay matter. Don’t assume that “hourly” means non-exempt and that “salaried” means exempt.
  • An employee must meet both the federal and state exemptions in order to be truly exempt. Be careful since both sets of requirements are sometimes similar and sometimes quite different. This document summarizes how to classify someone as exempt in a manner that will meet both sets of requirements.

Who is exempt?

Under Hawaii law and federal Law, employees may be exempt from overtime pay provisions if they are employed in the following capacities and if their job descriptions meet the definition of the following job categories:

  • executive
  • administrative
  • professional

The employee must:

1. be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week.

AND

2. be “primarily engaged” in duties that meet the definition of exempt work. Details are provided on the next page.

NOTE: In addition to the more typical “white collar” exemptions under federal and state law, there are a number of special case exemptions (including computer professionals and salespersons).

ANYONE NOT MEETING THE ABOVE REQUIREMENTS IS NON-EXEMPT!

Exempt vs. Non-Exempt Specific Rules for Classification – Hawaii

In Hawaii, employees may be exempt from overtime pay provisions if they can accurately be classified in one of the three following categories as defined by federal/state law:

An exempt EXECUTIVE employee must:

  • be compensated on a salary basis at a rate not less than $455 per week; AND
  • have as his/her primary duty the management of the business or of one of its recognized departments or subdivisions;
  • AND customarily and regularly direct the work of at least two or more full-time employees or their equivalent; AND
  • have the authority to hire or fire other employees or have particular weight given to his/her suggestions and recommendations regarding the hiring, firing, advancement, promotion, or change of status of other employees; AND
  • customarily and regularly exercise discretionary power.

An exempt ADMINISTRATIVE employee must:

  • be compensated at a rate not less than $455 per week (which includes a fixed salary of not less than $210 per week)
  • have as his/her primary duty the performance of office or non-manual work directly related to management policies or the general business operations of the employer or the employer’s customers; AND
  • customarily and regularly exercise discretion and independent judgment with respect to matters of significance; AND
  • regularly and directly assist a proprietor or an exempt executive or administrator OR perform, under only general supervision, work along specialized or technical lines requiring special training, experience or knowledge, OR execute special assignments and tasks under only general supervision.

An exempt PROFESSIONAL employee must:

  • be compensated at a rate not less than $455 per week (which includes a fixed salary or fixed fee of not less than $210 per week)*; AND
  • hold a valid license or certificate permitting the practice of law or medicine or any of their branches and who is actually engaged in the practice thereof or who is the holder of the requisite academic degree for the general practice of medicine and engaged in an internship or residency program for the profession; OR have as his/her primary duty the performance of work requiring advanced knowledge in a field of science or learning OR requiring invention, imagination, or talent in a recognized field of artistic endeavor; AND
  • consistently exercise discretion and independent judgment in the performance of the above duties; AND
  • perform work that is predominately intellectual and varied in character.

*The compensation/salary requirement does not apply to bona fide practitioners of law or medicine.

For more information, please contact us!

Exempt vs. Non-Exempt General Guidelines – California

Federal and state wage and hour laws require employers to pay minimum wages as well as overtime pay to some employees. Employees subject to these laws are called “non-exempt,” whereas employees to whom these provisions do not apply are called “exempt.” Distinguishing between these two classifications of employees is often not a simple job for an employer.

Important to remember:

  • Titles are irrelevant. Simply calling someone a “manager” does not make him/her an exempt employee.
  • Paying someone a salary does not automatically make the employee exempt – nor does the amount of money you pay matter. Don’t assume that “hourly” means non-exempt and that “salaried” means exempt.
  • An employee must meet both the federal and state exemptions in order to be truly exempt. Be careful since both sets of requirements are in some places similar and in others quite different. This document summarizes how to classify someone as exempt in a manner that will meet both sets of requirements.


Who is exempt?

Under California and federal law , employees may be exempt from overtime pay provisions if they are employed in the following capacities and if their job descriptions meet the state’s very narrow definition of the following job categories:

  • executive
  • administrative
  • professional

The employee must:

1. Earn a monthly salary equivalent to no less than two times the state minimum wage for full time (40hours per week) employment. Keep in mind that both the state minimum salary requirements increase annually so employers will need to monitor these numbers on an annual basis.

AND

2. Be “primarily engaged” (more than half of the employee’s work time) in duties that meet the definition of exempt work.

NOTE: In addition to the more typical “white collar” exemptions under federal and state law, there are a number of special case exemptions (including computer professionals and salespersons).

ANYONE NOT MEETING THE ABOVE REQUIREMENTS IS NON-EXEMPT!

Exempt vs. Non-Exempt Rules for Classification – California

In California, employees may be exempt from overtime pay provisions if:

  • They are paid a monthly salary equivalent to no less than two times the state minimum wage for full time (40 hours per week) employment; AND
  • they can accurately be classified in one of the following categories as defined by federal/state law:

An exempt EXECUTIVE employee must:

  • have as his/her primary duty the management of the business or of one of its recognized departments or subdivisions; AND
  • customarily and regularly direct the work of at least 2 full-time employees or their equivalent; AND
  • have the authority to hire or fire other employees or have particular weight given to his/her suggestions and recommendations regarding the hiring, firing, advancement, promotion, or change of status of other employees; AND
  • customarily and regularly exercise discretionary power; AND
  • devote more than 50 percent of his/her work time to the activities described above.

An exempt ADMINISTRATIVE employee must:

  • have as his/her primary duty the performance of office or non-manual work directly related to management policies or the general business operations of the employer or the employer’s customers; AND
  • customarily and regularly exercise discretion/independent judgment with respect to matters of significance; AND
  • regularly and directly assist a proprietor or an exempt administrator OR perform, under only general supervision, work along specialized or technical lines requiring special training, experience or knowledge OR execute special assignments and tasks under only general supervision; AND
  • devote more than 50 percent of his/her work time to the activities described above.

An exempt PROFESSIONAL employee must:

  • be licensed or certified by the State of California and primarily engaged in the practice of law (lawyers, not legal assistants), medicine (physicians, not nurses), dentistry, optometry, architecture, engineering, teaching, accounting (CPAs only) OR primarily engaged in an occupation commonly recognized as a learned or artistic profession; AND
  • customarily and regularly exercise discretion/independent judgment in performance of the above duties; AND
  • perform work that is predominately intellectual and varied in character.

*Note: Licensed physicians or surgeons are exempt from overtime if their hourly pay is equal to or greater than $76.24 during 2016 (adjusted annually). **Pharmacists and registered nurses are not considered exempt professionals; they may only be treated as exempt if they fit the definition of an exempt executive or administrative employee.

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