Minimum Hourly Pay Rate to Increase January 1, 2015

California Labor Code section 515.5 exempts certain employees in the computer software field from overtime compensation. The criteria include set minimum compensation. The California Department of Industrial Relations (DIR) recently increased this minimum, effective January 1, 2015.

To comply with the section 515.5 exemption, California employers will now have to pay otherwise qualified computer software employees a minimum hourly rate of $41.27, up from $40.38. The new rate translates to $7,165.12/month or $85,981.40/year.

While persons who qualify for this exemption need not be paid at “time-and-a-half” or “double time” rates for overtime hours, employers should accurately document the actual number of hours such qualified persons work. While companies commonly direct employees to track their hours worked, employers are primarily responsible for ensuring those records are truthful and complete.

An employee is an exempt computer professional only if he or she also meets each of the high-level skills and duties criteria for that exemption. An employer should ensure that any such worker meeting the very specific requirements 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 the “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.

If a computer professional meets all of section 515.5 requirements, he or she need not possess any particular academic degree to be eligible for this exemption.

Computer professionals also may be qualified for other exemptions, including the administrative or executive exemption. Each of those categories of course carries its distinct qualification rules.

For more information, please contact any of our office’s attorneys, Tim Bowles, Cindy Bamforth or Helena Kobrin.