California Professional Exemption

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Professional Exemption

Though an employee commonly may be considered a “professional,” specific legal requirements must be met to qualify for the professional exemption. The professional exemption extends to three categories of potentially exempt employees including Licensed, Learned and Artistic.
An employee who is not a licensed professional could still be exempt if the employee qualifies as a learned or artistic professional. California’s Wage Order 4, Professional, Technical, Clerical, Mechanical and Similar Occupations, classifies as nonexempt many occupations commonly considered artistic or learned professions, including artists, copy writers, editors, librarians, nurses, photographers, social workers, statisticians, teachers (other than state certified teachers), and many others. Unless an employee in one of these positions clearly meets one of the exemptions discussed in this chapter, based on the duties of the job, the employee must be classified as nonexempt.

Professional Exemption Test

A professional employee is exempt from overtime pay if the employee meets the following requirements. The employee must either be:

Licensed or certified by the State of California and primarily engaged in the practice of one of the following recognized professions: law, medicine, dentistry, optometry, architecture, engineering, teaching or accounting or
Primarily engaged in an occupation commonly recognized as a learned or artistic profession.

The “learned or artistic profession” exemption applies when an employee who is primarily engaged in work that either:

Requires advanced knowledge in a science or learning field customarily acquired by a prolonged course of specialized intellectual instruction and study, as opposed to a general academic education or an apprenticeship, and from training in the performance of routine mental, manual or physical processes or work that is an essential part of any of the above work; or
Is original and creative in character in a recognized field of artistic endeavor, as opposed to work that can be produced by a person endowed with general manual or intellectual ability and training, and the result of which depends primarily on the employee’s invention, imagination or talent, or work that is an essential part of any of the above work; and
To qualify for the learned or artistic profession exemption, the work must be predominantly intellectual and varied in character, as opposed to routine mental, manual, mechanical or physical work, and the output produced or the result accomplished cannot be standardized in relation to a given period of time.

To meet the test, the professional employee must also meet all of the following requirements:

Customarily and regularly exercises discretion and independent judgment in the performance of the duties previously described; and
Earns a monthly salary equivalent to no less than two times the state minimum wage for full-time employment. For this purpose, full-time employment is defined as 40 hours per week.

NOTE: There is an exception to the salary requirement for certain physicians who are paid at least an hourly rate set by the state.

Licensed Professionals are those who have a license in one of eight professions including law, medicine, dentistry, optometry, architecture, engineering, teaching and accounting.

Unlicensed "Learned" Professionals: Some individuals practice in one of the eight enumerated professions, but are not licensed. For example, an accountant may not have a Certified Public Accountant license or a recent law school graduate may be waiting for results from the licensing exam. In the past, some treated these unlicensed professionals as ineligible for the professional exemption. However, several courts have ruled that unlicensed accountants are not categorically ineligible for California’s professional exemption. While the unlicensed accountants (and presumably other unlicensed professionals) do not qualify under the licensed professional category, they may be eligible under either California’s learned professional exemption or administrative exemption. These decisions mean that employers can potentially classify these employees as exempt. Approximately 2,000 junior accountants filed a class action lawsuit against global accounting firm PricewaterhouseCoopers LLP (PwC), alleging that the company owed the accountants overtime pay. These junior accountants helped perform audits for PwC clients but did not possess CPA licenses. The unlicensed junior accountants argued that PwC improperly classified them as exempt employees and failed to provide them overtime pay. The junior accountants argued that their work did not involve the exercise of independent judgment and that they engaged in rote and menial work of comparing one number to another. The junior accountants believed they should have been classified as nonexempt employees. PwC argued that the junior accountants met the professional and administrative exemptions and that the company could classify them as exempt. Under California law, a professional employee is exempt from overtime pay if he/she:

Is licensed or certified by California state government and primarily engages in the practice of one of the following recognized professions: law, medicine, dentistry, optometry, architecture, engineering, teaching or accounting.
Is primarily engaged in an occupation commonly recognized as a learned or artistic profession.

The lower court held that the junior accountants categorically could not qualify for the professional exemption because only licensed accountants were covered. The Ninth Circuit Court of Appeals disagreed, noting that employees who did not have a license could still be classified as exempt if they met the various requirements for a “learned” profession.

Learned Professionals

Some individuals are exempt because they work in a learned profession. To be exempt under the learned professional exemption, the employee must meet the professional exemption requirements. Key points to remember about this test and how it may apply to learned professionals are as follows:

The educational requirement for the job is advanced. This is defined as a person who, to perform his/her job, completed a prolonged course of intellectual instruction in a recognized field of science or learning resulting in the attainment of an advanced degree or certificate. Knowledge of an advanced type must be knowledge which cannot be attained at the high school level. It is distinguished from a general academic education, apprenticeship, or training in routine mental, manual or physical processes. An example would be an advanced degree in a specialized field, such as a B.S. in Chemistry. In 2006, the DLSE deleted language that required that the degree be above a B.S. or a B.A. degree. However, advanced and prolonged instruction in a specialized field must be established.
The work must be mainly intellectual and varied in character (as opposed to routine mental, manual, mechanical or physical work).The product or result of the employee’s work cannot be standardized with respect to time. The employee has considerable freedom of choice as to when and how to carry out a task.
The individual generally controls his/her hours of work.
The work is predominately (more than 50 percent of the time) intellectual and varied in character as opposed to routine mental, manual, mechanical or physical work.
Individual analysis of employee job duties is critical and the exemption cannot simply applied to broad classes of professions.
The employee must “customarily and regularly” exercise “discretion and independent judgement in the performance of his/her duties.”

NOTE: If these requirements are applied, the employee must still meet the discretion and independent judgment test and the employee must earn at least two times the minimum wage to be properly classified as exempt.

Artistic Professional Exemption

In California, relatively few individuals qualify for exemption as members of artistic professions. Most of those who exert sufficient control over the nature of their own work and over their work hours are self-employed in an artistic profession. An individual involved in work that is creative must meet the requirements of the professional test to qualify for the artistic professional exemption. Key points to remember about this test and how it may apply to artistic professionals are as follows:

The employee must be primarily engaged in the performance of work that is original and creative in character in a recognized field of artistic endeavor (as opposed to work that can be produced by a person endowed with general manual or intellectual ability and training) and the result of which depends primarily on the employee’s invention, imagination or talent, or work that is an essential part of or necessarily incident to any of the above work. The term “recognized field of artistic endeavor” has been defined to include “such fields as music, writing, the theater, and the plastic and graphic arts.” This includes not only standard musical instruments and traditional media, but also newer evolving media, such as music synthesizers and computer and graphic art design; and
The work must be predominantly intellectual and varied in character (as opposed to routine mental, manual, mechanical or physical work).
The employee must customarily and regularly exercise discretion and independent judgment in the performance of duties.
The employee must earn a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.

Academic degrees are not required, but a specialized course of study of at least four years is generally one element involved in establishing a professional standing in the fine arts. This element of study by itself is not enough. Composers or vocal instrumental soloists may be exempt because of their wide-ranging discretionary powers, including control over their working conditions. However, members of an orchestra may not be exempt employees. Some writers employed in the motion picture or broadcast industries possess sufficient discretionary powers to be exempt. Most do not, even when working at home, because of time limits, restricting outlines or other constraints on the creative aspects of their work.