California Labor Code section 515.5 exempts certain computer software professionals from overtime compensation who receive specified minimum compensation. California’s Department of Industrial Relations (DIR) has announced its rate increase for this minimum, effective January 1, 2017.

To comply with the section 515.5 exemptions, California employers must pay otherwise qualified computer software employees a minimum hourly rate of $42.39, up from $41.85. Alternatively, an otherwise qualified employee paid by salary is eligible on minimum annual compensation of $88,318.55, payable at least once monthly at no less than $7,359.88.

An exempt computer professional must also meet each of the high-level skills and duties criteria for that exemption as laid out in Labor Code section 515.5. Among these, the employee must be “primarily engaged” (more than 50% of the time) in intellectual or creative work which requires “the exercise of discretion and independent judgment” applying systems analysis to determine “functional specifications” of hardware, software or systems; designing computer systems or programs; and/or documenting, testing, creating or modifying computer programs related to computer systems software or hardware design.

Although such qualified employees need not be paid overtime premium under California law, employers should further ensure such workers meet the overtime exemption for computer professionals under federal law.

It is also possible for computer professionals to qualify for the administrative, executive or “learned profession” exemptions from overtime. Each category possesses its own distinct qualification rules.

For more information, please contact one of our attorneys Tim Bowles, Cindy Bamforth or Helena Kobrin.

Cindy Bamforth, October 27, 2016