As California prepares for another increase in the state minimum wage rate, employers that employ computer software employees should also be aware of the increase in the minimum wage rate that must be paid to their IT workers to continue qualifying for overtime-exempt status next year.
The computer software employee’s overtime exemption is found in California Labor Code Section 515.5. The section provides that certain computer software employees are exempt from mainstay overtime requirements if certain criteria are met. To qualify for the exemption, IT employees must earn a minimum hourly rate of pay and be engaged in certain enumerated job duties. The computer software employee’s minimum wage rate is adjusted every year for increases in the cost of living, as measured by the Consumer Price Index (CPI). This year, the CPI increased 1.2% raising the computer employee’s minimum hourly rate of pay exemption to $42.35 per hour, or a minimum monthly salary of $7,352.62, or $88,231.36 annually.
The primary aspects of the exemption include:
- The employee is primarily engaged in work that is intellectual or creative.
- The employee’s duties that consist of one or more of the following:
- the application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
- the design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to, user or system design specifications;
- or the documentation, testing, creation, or modification of computer programs related to the design of software or hardware for computer operating systems.
- The employee is highly skilled and proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming and software engineering.
- The employee is paid the minimum wages provided above.
The exemption does not apply to individuals that are:
- trainees or entry-level employees;
- workers who lack the level of skill and expertise necessary to work independently;
- employees whose work consists of manufacturing, repairing or maintaining computer hardware;
- engineers, drafters, machinists, or other professional employees whose work is highly dependent upon or facilitated by the use of computers and computer software programs but who are not computer systems analysts or programmers;
- writers that write box labels, product descriptions, documentation, promotional material, setup and installation instructions, for print, on-screen media, the web or CD-ROMs; and
- employees engaged in creating imagery for effects used in the motion picture, television, or theatrical industry.
To continue qualifying for the exemption, employers should perform yearly audits to make sure that their IT employees are performing exempt duties and are being paid the minimum compensation rate. In addition, employers should ensure that the appropriate California Industry Wage Order (“IWC”) for their industry is posted in the workplace. All IWCs will be updated later this year to reflect the 2017 minimum wage rate for the computer employee’s overtime exemption.
Need help deciding which IWC is required for your industry? Give us a call. We can guide you.