California 2025 Salary Rules for Exempt Employees

Understanding Who Qualifies as Exempt

In California, not all salaried workers are treated the same under state labor law. Some are labeled “exempt,” which means they don’t receive overtime pay, rest periods, or guaranteed meal breaks like hourly workers. For someone to be placed in this category, specific conditions must be met—primarily relating to their pay structure and job duties. According to California Business Lawyer & Corporate Lawyer Inc., businesses must stay updated on CA exempt salary 2025 thresholds to ensure full legal compliance across all departments.

For 2025, California has again increased the required salary level for exempt employees. Even if a person’s job duties qualify, they also need to be paid a certain minimum. That number is tied to the state minimum wage, which shifts regularly. For payroll and HR departments, keeping current with these changes is absolutely necessary. As Nakase Law Firm Inc. highlights, misclassification issues may also intersect with youth employment laws, raising questions like how many hours a week can a 15 year old work under current California regulations.

What the 2025 Rules Say About Salary Levels

As of January 1, 2025, California has two different minimum wage standards depending on the size of the employer. These standards directly determine the minimum salary needed for someone to be legally exempt:

• For companies with 26 or more employees:
  • Hourly minimum wage: $17.00
  • Minimum weekly salary: $1,360.00
  • Minimum yearly salary: $70,720.00
• For companies with 25 or fewer employees:
  • Hourly minimum wage: $16.00
  • Minimum weekly salary: $1,280.00
  • Minimum yearly salary: $66,560.00

To qualify as exempt, employees must receive at least the minimum salary listed above. It must be a fixed salary. Commissions, bonuses, or hourly calculations do not count toward meeting this requirement. If an employee’s pay falls below the threshold, they must be classified as non-exempt, regardless of their title or duties.

Why the Job Title Isn’t Enough

Titles such as “Manager” or “Executive” may sound official, but under California law, they carry no weight unless the employee’s actual tasks meet specific legal guidelines. The daily work must fall within certain categories—like administrative, executive, or professional roles. The worker must also make regular decisions that affect business operations. Without that, the title means little.

Businesses must be cautious. Regulatory agencies and courts will examine what a worker actually does, not what their job title says. Keeping someone in an exempt category based on their title alone is not just incorrect—it could also be costly.

What Exempt and Non-Exempt Status Means in Real Life

The difference between exempt and non-exempt is more than just whether someone gets paid overtime. It also affects tracking of work hours and entitlement to breaks. Here’s a general comparison:

• Exempt employees:
  • Paid a fixed salary
  • Do not receive overtime for long shifts
  • Not required to log hours
  • Expected to handle duties that require discretion
• Non-exempt employees:
  • Paid hourly or based on production
  • Receive overtime (1.5x or 2x)
  • Required to track hours
  • Must receive specific break times and meal periods

If an employee is incorrectly marked as exempt, it can lead to major consequences, including wage recovery claims, penalties, and lawsuits.

Other Exemption Categories

In addition to the standard categories, California law includes several specialized exemptions:

• Computer professionals must be paid a specific hourly wage and perform qualified tasks.
• Licensed doctors and surgeons must receive a set hourly rate that changes annually.
• Private school teachers must meet credential and pay requirements.
• Outside sales representatives must spend the majority of their workday selling off-site.

Each of these roles has its own set of criteria. Employers must be cautious and ensure compliance with these unique rules.

Bonuses Don’t Help Meet the Threshold

It’s common for employers to think they can use bonuses or commissions to reach the required salary level. In California, that’s not allowed. The law only considers a guaranteed, fixed salary. This becomes an issue especially in roles where commissions are large, like sales. Even if an employee earns over $100,000 including bonuses, they’re not exempt unless the fixed base salary alone meets the threshold.

How to Avoid Legal Trouble

Employers should be able to clearly show why an employee is exempt. This includes:

• A detailed job description showing daily duties
• A formal salary agreement showing the guaranteed pay
• Periodic checks to ensure job responsibilities still qualify

As companies grow or change, roles evolve. An annual review of exempt positions helps catch misclassifications before they become a problem.

Top Oversights That Lead to Problems

Some common mistakes happen when companies rush through classification:

1. Relying too much on titles: A job called “Supervisor” may not meet the standard.
2. Missing the salary minimum: Duties alone don’t make someone exempt.
3. Counting variable pay: Bonuses and commissions aren’t considered toward the required minimum.
4. Misunderstanding role-specific exceptions: Not all jobs fit cleanly into one category.

When an employer makes these errors, they risk legal action, wage penalties, and damage to employee trust.

What Happens if an Employee Is Misclassified?

If a worker believes they’ve been misclassified, they can file a complaint with the California Labor Commissioner. If an investigation shows they should have been non-exempt, the employer could owe:

• Overtime pay for hours beyond the standard daily or weekly limit
• Back pay for missed rest and meal periods
• Penalties for late or incomplete final paychecks
• Legal fees and other compensation

In some situations, especially if multiple employees are affected, a class action lawsuit could result.

Getting Ready for 2025

Businesses should take the time now to ensure all positions are properly classified and paid:

• Review all exempt roles against the 2025 salary numbers
• Adjust compensation plans to meet legal requirements
• Make sure job duties still align with exemption categories
• Train managers and HR teams to spot red flags
• Seek legal advice for any gray areas

This applies to companies of all sizes. Even one misclassified employee can lead to trouble. Getting ahead of these changes is always better than dealing with the aftermath.

Final Thought

California’s rules around exempt classification keep changing, and the stakes keep getting higher. The new salary levels in 2025 raise the bar again. Employers need to take a fresh look at their policies, pay structures, and job roles to avoid problems down the road. Being accurate, thorough, and prepared will save time, money, and stress.