Exempt and nonexempt in the dental office: Classify correctly to avoid penalties

Wage order 4 outlines requirements for dentist-employers in California
May 30, 2024
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QUICK SUMMARY: In California, all employees are considered nonexempt unless the employee’s role can be legally classified as an exemption under section 1 of wage order 4. Employers are responsible for analyzing staff positions to determine proper classification and pay. CDA has a quick guide that covers the requirements for the administrative, executive and professional exemptions in the dental office.

Exempt or nonexempt? In California, the distinction is a legal one. Wage and hour orders protect nonexempt employees, and employers who misclassify their employees can face steep penalties.

In California, all employees are considered nonexempt unless the employee’s role can be legally classified as an exemption under section 1 of the Industrial Welfare Commission’s wage order 4.

Exempt employees are paid a fixed biweekly or monthly salary and are not subject to many of the protections of California’s industrial wage orders. They do not receive overtime, are not subject to meal and rest break requirements and generally are not required to track their working hours.

Ensure employees qualify for an exempt classification

In general, an executive, administrative or professional exempt employee is in a position of management or possesses a decision-making role in the business. In the dental practice, the office manager may qualify for an exemption in the category of executive, administrative and professional employees. However, the employee must spend at least 51% of their time in a role on essential exempt duties. Not all manager duties are managerial, and a manager may spend most of their hours performing nonexempt duties such as scheduling and confirming patients and managing records.

Employers are responsible for analyzing staff positions following wage order 4 to determine proper classification. The analysis includes a review of not only the position’s activities and responsibilities, but its relative importance compared to other positions, the position’s necessary qualifications and the conditions under which the work is performed.

CDA’s members-only quick guide Exempt Employee Classification Compliance Checklist covers the requirements for the administrative, executive and professional exemptions. To be properly classified as exempt in any category, the employee’s responsibilities must meet all — not some — of the qualifications.

The professional exemption does not include dental hygienists except in very limited circumstances.

Exempt employees must earn at least twice the state minimum wage

Dentists may have read news about the U.S. Department of Labor’s rule effective July 1 that raises the minimum salary threshold for certain overtime exemptions.

The DOL rule does not impact employers in California, because the salary thresholds are higher in California per the following:

  • Exempt employees must be paid a salary of at least two times the current state minimum wage for their full-time employment.
  • Exempt employees’ salaries must meet the threshold of $1,290/week, $5,547/month, $65,560/year, which is higher than the federal standard.

Employers who misclassify an employee can be held responsible for actual damages owed for unpaid overtime and any corresponding fines, inaccurate wage statements, failure to provide required meal and rest period breaks and failure to pay overtime wages before the next payroll period.

“To avoid legal risk and, in some cases, attorney’s fees, carefully consider each classification and develop job descriptions to support the classification,” says CDA Employment Practices Analyst Michelle Coker.

For more details on wage order 4, exemptions and permissible and impermissible deductions, such as for paid time off and partial-day absences, CDA members can consult CDA’s Practice Guide to Employee Classifications in a Dental Practice. The guide also includes links to an exempt employee sample offer letter and related resources.

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