How Do I Resolve a Misclassification Dispute in California?

To resolve a misclassification dispute in California, it’s essential to first understand what employee misclassification is and how the law applies to your situation. Misclassification happens when an employer unlawfully labels a worker as “exempt” from overtime. This often results in the denial of overtime pay, meal and rest breaks, and other wage protections—amounting to wage theft under California law.

Employers sometimes misclassify workers to cut costs and avoid compliance with labor laws. But classification is governed by legal standards, not an employer’s preferences. If your actual duties or level of independence do not meet the criteria for exemption, you may be entitled to recover unpaid wages and penalties.

Before we walk through the critical steps to resolve a misclassification dispute, it’s important to review how California law defines employee misclassification and what legal remedies may apply in your case.

What is a Misclassification Dispute: Exempt vs. Non-Exempt from Overtime

A misclassification dispute arises when an employer improperly labels an employee as “exempt” from California’s wage and hour protections, particularly the right to earn overtime. California law presumes all employees are “non-exempt” and entitled to overtime pay unless the employer can prove otherwise. Unfortunately, many employers misclassify employees, either intentionally or through misunderstanding, leading to unpaid wages and legal exposure.

For a deeper explanation of how exempt misclassification leads to wage theft in California, see our blog: Misclassification of Employees As ‘EXEMPT’ versus ‘NON-EXEMPT’ From Overtime: Understanding the Important Differences.

General Distinction Between Exempt and Non-Exempt Employees

The core distinction between exempt and non-exempt employees lies in their right to receive overtime pay. Non-exempt employees are entitled to overtime wages for hours worked over 8 in a day or 40 in a week. Exempt employees are not entitled to overtime and are paid a regular salary, but only if their job duties and compensation meet specific legal tests under California law. It’s not enough to simply be salaried or hold a professional-sounding title. What matters is what the employee actually does at work.

Why the Classification Matters

Whether an employee is properly classified as exempt vs. nonexempt has major financial implications. If you were wrongly classified as exempt by your employer, you may be entitled to years of unpaid overtime, along with statutory penalties, interest, and attorney’s fees. Employers that misclassify workers can face significant liability, particularly if multiple employees are affected.

Isn’t It Better to Be Paid a Salary?

Not really.  Employees often assume that being salaried is more prestigious or secure. In reality, salaried employees who are misclassified often work longer hours without additional pay. Most salaried workers clock more than 40 hours per week—rarely less—so they miss out on overtime earnings. Further, salary offers no job security; California is an at-will employment state, so employees can be terminated with or without cause, regardless of whether they’re salaried. The belief that a salaried role is more stable or beneficial is misleading and generally false.

Who Has the Burden of Proof for Proper Classification in California?

Under California law, the employer always bears the burden of proving that an employee is properly classified as exempt from overtime pay. California law presumes that workers are non-exempt and entitled to overtime. If a misclassification claim is brought, the employer must establish that the employee meets every element of the applicable exemption. These requirements, including both the salary basis and duties tests, are set forth in Labor Code § 515.

Can California Employers “Gross Up” Salary for Overtime?

No. California law does not allow employers to “gross up” or build overtime pay into an employee’s fixed salary. A salary can only cover straight-time hours: 8 hours per day or 40 hours per week. Any hours worked beyond that must be paid at the required overtime rate, which is based on the employee’s regular rate of pay. An employer that tries to retroactively assert that the salary paid included overtime compensation will lose every single time, no exception. Courts consider this an attempt to avoid payment of unpaid overtime, which only increases the amount owed and the employer’s potential liability.

What Is the Statute of Limitations to Recover Unpaid Overtime from Misclassification in California?

Employees who were misclassified and denied overtime have three years from the date of each violation to file a wage claim.

Common Misclassification Scenarios

While California recognizes several exemptions, disputes most frequently involve the Executive and Administrative exemptions. Professional employees, such as licensed doctors and lawyers, are always exempt under California law and therefore do not normally raise disputes about overtime pay.  Here are some of the most frequent misclassification scenarios:

Scenario #1: Managers Who Don’t Supervise Anyone (or fewer than two full-time employees)

Merely having the title of “manager” does not make an employee exempt from overtime pay. Under California law, to qualify for the executive exemption, an employee must regularly and directly supervise at least two full-time employees (or the equivalent in part-time employees). If a so-called “manager” does not have real supervisory authority, such as hiring, firing, disciplining, or directing the daily work of two or more employees, they likely do not meet the exemption requirements. Employers often misuse titles to avoid paying overtime, but the law focuses on actual job duties, not job titles.

Scenario #2: Assistant Managers

Assistant managers are frequently misclassified as exempt, even though they spend most of their time performing the same duties as non-exempt employees such as serving customers, stocking shelves, or operating registers. If they lack real authority over hiring, firing, discipline, or scheduling, and have little to no discretion in how work is performed, or only occasionally perform true “management” functions, the Assistant Manager probably is not truly exempt under California law. Simply assisting a manager or occasionally giving direction is not enough to qualify for an exemption from overtime.

Scenario #3: Mid-Level Administrative Employees

Employees in administrative roles are often misclassified as exempt, especially in office settings where their job titles sound professional. However, to qualify for the administrative exemption under California law, an employee must regularly exercise discretion and independent judgment on significant matters related to the business’s operations or management. Many mid-level administrative workers, such as coordinators, specialists, analysts or similar roles, simply follow established procedures, complete routine paperwork, or implement decisions made by others. If their role involves little authority to make independent choices or affect company policy, they likely do not meet the exemption requirements and must be paid overtime.

Scenario #4: Highly Compensated Employees

Earning a high salary does not automatically exempt an employee from overtime pay under California law. Exempt status is determined by the actual job duties performed, not by how much the employee is paid. Even employees making six-figure salaries may be entitled to overtime if they do not meet the strict requirements of an exemption, such as regularly exercising independent judgment, managing other employees, or performing duties that are primarily intellectual or managerial in nature. California law emphasizes substance over title or pay, and employers cannot avoid wage obligations simply by offering a high salary or even a very high, outrageous salary.

Scenario #5: Employees Without Independent Judgment

To qualify as exempt under California law, an employee must exercise discretion and independent judgment in matters of significance, not just follow instructions or apply standard procedures. Employees who perform repetitive tasks, rely on detailed guidelines, or must obtain approval before making decisions typically lack the level of autonomy required for exempt status. Even if their job appears professional or administrative on the surface, if they have little control over how their work is carried out, they are likely misclassified and legally entitled to overtime pay and other wage protections.

How to Determine if You Are Misclassified as Exempt

To be lawfully classified as exempt from overtime, your job must meet strict legal criteria set forth under California law. These exemptions are narrowly defined and depend primarily on your actual job duties, not your job title or how much you’re paid. Below are the five most common exemptions, each with specific requirements that must be met:

Exemption #1: Executive Exemption

To qualify for the executive exemption:

• You must manage a department, division, or recognized subdivision of the business.
• You must regularly and directly supervise at least two full-time employees (or the equivalent).
• You must have meaningful authority over hiring, firing, promotion, discipline, or other significant employment decisions—or your recommendations must carry real weight.
• You must regularly exercise independent judgment and discretion in your role.
• You must be paid a fixed monthly salary equal to at least twice the state minimum wage for full-time work.

Note: Simply having the title “manager” or “supervisor” is not enough—your actual responsibilities must reflect these criteria.

Exemption #2: Administrative Exemption

To qualify under the administrative exemption:

• Your primary duty must be office or non-manual work that is directly related to the management or general business operations of your employer or its customers.
• You must exercise discretion and independent judgment with respect to matters of significance—such as planning, policy implementation, or business strategy.
• You must be paid a monthly salary of at least twice the state minimum wage for full-time work.

Note: Employees who perform routine clerical or support work, even in an office setting, typically do not qualify as exempt.

Exemption #3: Professional Exemption

To be classified under the professional exemption:

• You must work in a recognized profession that typically requires advanced knowledge and education, such as law, medicine, dentistry, engineering, teaching, or accounting.
• Alternatively, you may qualify if you are in a creative field (such as writing, music, or design) and consistently use originality and invention in your work.
• You must customarily and regularly exercise discretion and independent judgment in your professional tasks.
• You must receive a salary of at least twice the state minimum wage for full-time work (some licensed professions have different pay standards under wage orders).

Note: Merely working in a professional environment or having a degree does not automatically qualify you for this exemption.

Exemption #4: Computer Professional Exemption

To qualify for this technical exemption:

• You must work primarily in intellectual or creative work involving computer systems, such as software engineering, systems analysis, or design.
• Your duties must require independent judgment and discretion in programming, system architecture, or troubleshooting complex issues.
• You must not perform help desk, hardware repair, or routine IT support work.
• You must be paid either:
  • A fixed salary meeting the minimum threshold set annually by California law, or
  • An hourly rate that meets the minimum legal requirement (e.g., $55.58/hour as of 2025; subject to annual adjustment).

Note: Job titles like “IT Specialist” or “Technician” rarely qualify unless the duties meet the strict legal test.

Exemption #5: Outside Sales Exemption

To qualify as an outside sales employee:

• You must spend more than 50% of your working time engaged in sales-related activities away from your employer’s primary place of business.
• Your duties must involve selling products or services, or obtaining orders or contracts.
• There is no salary requirement, but the time-based requirement is strictly enforced.

Note: Salespeople who primarily work in a retail store, showroom, or call center—rather than in the field—do not meet this exemption, even if they earn commissions.

4 Critical Steps to Resolve a Misclassification Dispute:

To successfully resolve a misclassification dispute, you need to present a well-organized and credible record of your job duties and hours worked. The four steps below will help you build a compelling case for unpaid wages due to misclassification.

Step #1: Create a Comprehensive Explanation of Your Job Duties

Start by writing a detailed explanation of your day-to-day responsibilities. Focus on:

• The limits of your authority in performing your job
• Your lack of discretion or decision-making power
• Specific directions and policies from your employer that dictated how tasks had to be performed

This step helps establish that you were not performing duties that qualify for exemption under California law.

Step #2: Determine the Actual Hours You Worked Over the Past Three Years

To recover unpaid overtime, you need to identify how much you actually worked. California law allows recovery going back three years.

• Use a calendar to reconstruct the hours you worked each day and week. This can be based on your memory, emails, or other records.
• Create an annotated chart summarizing the total hours worked each week over the three-year period.

Sample Annotated Work Hours Chart

If your employer failed to maintain accurate time records—as many do for salaried workers—your own records are presumed accurate under California law. Under Labor Code § 226, the employer bears the burden of disproving the hours you claim to have worked.

Step #3: Create an Annotated Report

Prepare a written report that includes:

1. A detailed description of your job duties and responsibilities
2. A narrative based on your personal experience describing what you actually did
3. A comparison of your actual duties with the employer’s job description, pointing out how it overstates your authority or discretion
4. An explanation of why your duties do not meet the legal requirements for exemption (such as the executive or administrative exemptions)
5. A breakdown of your estimated overtime hours and a description of how those estimates were determined (e.g., based on recollection, patterns, calendar review)
6. A demand for payment from the employer, including a specific deadline for response—typically within 2–3 weeks

Step #4: Decide How to Proceed if the Employer Refuses to Act

If your employer does not correct the misclassification, you have two primary options:

• File a wage claim with the California Labor Commissioner, which is generally appropriate for smaller or more straightforward cases. The California Labor Commissioner’s Office provides a detailed overview of this process at: https://www.dir.ca.gov/dlse/HowToFileWageClaim.htm.
• Hire an experienced employment attorney and file a lawsuit in court, which is typically the best approach for more complex disputes or those involving significant unpaid wages.

Matt Ruggles has over 30 years of experience litigating employment law cases throughout California, including the recovery of substantial unpaid wages for misclassified employees. If you believe you have been misclassified, contact the Ruggles Law Firm for a free consultation and a realistic assessment of your potential claim.

FREQUENTLY ASKED QUESTIONS ABOUT EMPLOYEE MISCLASSIFICATION

What is employee misclassification in California?

Employee misclassification occurs when an employer incorrectly classifies a worker as “exempt” from overtime or as an independent contractor instead of an employee. This can deny workers legally guaranteed rights such as overtime pay, meal and rest breaks, and wage protections under California law.

How do I know if I’ve been misclassified as exempt from overtime?

Your job title or salary does not determine your classification. What matters is your actual job duties. If you do not regularly exercise independent judgment or supervise others and mostly follow set procedures, you may be non-exempt and entitled to overtime. Labor Code § 510 governs overtime rights.

Can my employer claim my salary already included overtime pay?

No. Under California law, a salary only covers straight-time pay. Employers cannot “build in” overtime to a flat salary. Any such practice violates Labor Code § 1194, which guarantees separate compensation for overtime hours.

Who has the burden of proof in a misclassification dispute?

The employer does. California law presumes all employees are non-exempt. The employer must prove you meet every element of a legal exemption. See Labor Code § 515.

What if my employer didn’t keep time records?

If your employer failed to maintain accurate records, your own time records are presumed correct. The employer must disprove your claimed hours. This is supported by Labor Code § 226.

How far back can I recover unpaid wages for misclassification?

You can recover up to three years of unpaid wages under California law. In cases of willful misclassification, that period may be extended. It is advisable to act promptly while records and witnesses are still available.

Can I pursue a misclassification claim while I’m still employed?

Yes. You can pursue a misclassification claim while still employed. While it may feel uncomfortable to challenge your employer while on the job, doing so can increase your leverage and improve your chances of reaching a favorable outcome. California law protects employees from retaliation for asserting their workplace rights, including wage and hour claims related to misclassification.

Contact the Ruggles Law Firm at 916-758-8058 to Evaluate Your Potential Lawsuit

Matt Ruggles has a thorough understanding of California employment laws and decades of practical experience litigating employment law claims in California state and federal courts.  Using all of his knowledge and experience, Matt and his team can quickly evaluate your potential claim and give you realistic advice on what you can expect if you sue your former employer.

Contact the Ruggles Law Firm at 916-758-8058 for a free, no obligation consultation.

Blog posts are not legal advice and are for information purposes only.  Contact the Ruggles Law Firm for consideration of your individual circumstances.