California Assembly Bill 2535, signed on July 22, 2016 by Governor Brown, amends California Labor Code Section 226. Prior to this amendment, employers were required to track and record hours worked for exempt outside sales persons and executives who are not paid solely by salary. This meant that such tracking was required, even where an employee was not compensated for hours worked, but received commissions, bonuses or stock options.

AB 2535 amends Labor Code Section 226 to eliminate this anomaly. Employers are no longer required to record hours for employees exempt from payment of minimum wage and overtime. Specifically, the law adds section (j) to Section 226, which, effective January 1, 2017, will provide:

“(j) An itemized wage statement furnished by an employer pursuant to subdivision (a) shall not be required to show total hours worked by the employee if any of the following apply:

(1) The employee’s compensation is solely based on salary and the employee is exempt from payment of overtime under subdivision (a) of Section 515 or any applicable order of the Industrial Welfare Commission.

(2) The employee is exempt from the payment of minimum wage and overtime under any of the following:

(A) The exemption for persons employed in an executive, administrative, or professional capacity provided in any applicable order of the Industrial Welfare Commission.

(B) The exemption for outside salespersons provided in any applicable order of the Industrial Welfare Commission.

(C) The overtime exemption for computer software professionals paid on a salaried basis provided in Section 515.5.

(D) The exemption for individuals who are the parent, spouse, child, or legally adopted child of the employer provided in any applicable order of the Industrial Welfare Commission.

(E) The exemption for participants, director, and staff of a live-in alternative to incarceration rehabilitation program with special focus on substance abusers provided in Section 8002 of the Penal Code.

(F) The exemption for any crew member employed on a commercial passenger fishing boat licensed pursuant to Article 5 (commencing with Section 7920) of Chapter 1 of Part 3 of Division 6 of the Fish and Game Code provided in any applicable order of the Industrial Welfare Commission.

(G) The exemption for any individual participating in a national service program provided in any applicable order of the Industrial Welfare Commission.”

Employers with any questions about wage statement requirements are encouraged to contact their experienced employment law counsel. We’re here to help.