©2026 Seyfarth Shaw LLP www.seyfarth.com 2026 Cal-Peculiarities | 231 part of the FLSA’s purpose as the overtime-pay requirement. … We thus have no license to give the exemption anything but a fair reading.”183 California, meanwhile, is radically different. Its high court proclaims that wage and hour exemptions are “narrowly construe[d] … against the employer.”184 7.6.1 Salary requirement Under both federal and state law, an employee must be salaried to qualify as an executive, administrative, or professional employee. Thus, with some specific exceptions (e.g., computer professionals, physicians), all hourly paid employees are nonexempt, regardless of their duties or their level of pay. Minimum salary. For exemptions requiring a salary basis, the salary paid must meet a certain numerical minimum. Under federal law, the salary basis is met so long as the weekly salary is at least $684 (equating to an annual salary of $35,568).185 In California it’s different. To qualify as a salaried exempt employee, a California employee must earn a salary that is at least twice the monthly state minimum wage for full-time (40 hours per week) employment.186 So as California’s minimum wage escalates, the minimum pay needed to meet the salary basis escalates accordingly. For all employers, the minimum weekly salary for an exempt California employee as of 2025 is $1,320 (twice the minimum wage of $16.50 and equivalent to an annual salary of $68,640). Industryspecific minimum wages can also affect the salary threshold for exempt employees. For example, under SB 525 passed in 2023, healthcare employees must earn a salary equal to at least 150% of the applicable healthcare worker minimum wage or 200% of the California state minimum wage for full-time employment, whichever is greater, to maintain exempt status.187 A Court of Appeal decision has held that a guaranteed minimum monthly commission draw for financial advisers did not equal a “salary,” and thus the advisors were not paid the minimum salary required for the administrative exemption. Reversing a summary judgment for the employer, the Court of Appeal reasoned that, to qualify as salary, payments must be predetermined, and that draw against future commissions paid if the financial advisers fell below a certain level did not qualify as “salary.” The Court of Appeal held that advances on not-yet-earned commissions do not constitute wages under California law. The employer’s pay structure thus did not satisfy the salary basis test, and the administrative exemption for employees paid a monthly salary equivalent to at least twice the state minimum wage for full-time employment therefore did not apply.188 Vacation deductions for partial-day personal absences? In interpreting the salary requirement, federal regulators have permitted employers some flexibility in charging an employee’s PTO bank for partial-day absences from work. But the DLSE argued that California vacation pay, being “vested,” cannot be deducted for partial-day absences without destroying the salary basis. A 2005 Court of Appeal decision rejected this theory, holding that California employers may require the use of accrued vacation for partial-day absences without causing otherwise exempt employees to become nonexempt under the salary basis test.189 A 2009 DLSE opinion letter followed this position, opining that deductions from accrued sick-leave and vacation balances generally do not destroy an employee’s salary basis.190 Because the 2005 case involved a leave policy that made deductions from an employee’s PTO bank only for partial-day absences of at least four hours, some employers made PTO adjustments for partial-day absences only when they were four hours or more. In 2014, however, the Court of Appeal held that deductions from accrued vacation time are permissible in California regardless of the length of the exempt employee’s partial-day absence.191 7.6.2 Executive exemption A California exempt executive must (1) be primarily engaged in managing a department or subdivision of it, (2) supervise at least two other individuals, (3) have the authority to hire or fire other employees, or effectively recommend the same, (4) customarily and regularly exercise discretion and independent judgment in the
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