On September 9, 2020, Governor Newsom signed Assembly Bill (“AB”) 736, expanding the professional exemption under Industrial Welfare Commission (“IWC”) under Wage Orders Nos. 4-2001 and 5-2001 to expressly include part-time or “adjunct” faculty at private, nonprofit colleges and universities in California.  The sponsors of AB 736, the Association of Independent California Colleges and Universities, advocated for the bill to address perceived ambiguities in the California Labor Code that had spawned litigation causing some colleges and universities to reclassify adjunct faculty as hourly, non-exempt employees.

AB 736 became effective immediately, adding section 515.7 to the Labor Code.  Accordingly, independent institutions of higher education with adjunct faculty who are classified as exempt should review their employees’ duties and compensation structure to ensure they conform to the newly enacted two-part test set forth in section 515.7.

The first prong of the test is duty-related.  Specifically, the exemption applies to employees who provide instruction for a course or laboratory at an independent institution of higher education if: “(A) The employee is primarily engaged in an occupation commonly recognized as a learned or artistic profession; and (B) The employee customarily and regularly exercises discretion and independent judgment in the performance of [those] duties.”  The statute provides specific guidance regarding what qualifies as a “learned or artistic profession” for purposes of determining whether a specific employee meets this duty-related requirement.

If an employee satisfies the duty-related test, the exemption applies so long as one of two minimum compensation requirements is satisfied.  Employees paid a monthly salary must earn at least two times the state minimum wage for at least 40 hours per week.  Alternatively, employees paid per course or laboratory must be paid in accordance with the rates in section 515.7 (i.e., $117/hour for 2020; $126/hour for 2021; $135/hour for 2022).  The rate increases for 2023 and subsequent years will be calculated based on a percentage increase to the California minimum wage.

Affected employers should review their employee classification and payroll practices immediately.