Computer Professional Exemption
Although many computer programmers are paid on a salary and never receive overtime, the fact is that computer programmers must be paid overtime unless they meet one of the exemptions. If you spend more than 50% of your time on analysis and design of software, you might qualify for the Administrative Exemption. However, if you spend more than 50% of your time writing code, you will likely be entitled to overtime unless you meet the very strict requirements of the exemption discussed on this page.
I have added a page in which I evaluate various computer and technology job descriptions to determine whether those positions are entitled to overtime or not.
Effective January 1, 2008, the wage rate in order to qualify for the exemption was drastically reduced. This reduction was brought about by a new law that was passed in late 2007. The result is that many computer programmers in California will lose their right to overtime pay for all work performed starting in 2008. You can still claim for work that was performed in the last 4 years, and any computer programmers who are going to lose their non-exempt status should contact me to see if they can recover for past overtime. For a video presentation covering the Computer Professional Exemption and that changes in 2008, please click here.
This Computer Professional exemption is the one that employers frequently make mistakes on. You will see that it is very difficult to meet. In addition, if you are paid a salary, you can't meet the exemption for work prior to 2006. For 2006 and onwards, your salary has to be pretty high to insure that you meet it. Even with the lower 2008 wage rate, it is important to know that you must make at least the minimum for every hour worked. Thus, a fixed salary will not always cover you -- as you can see in the table below.
You should also note that this law is specific to California. Most other states follow the Federal exemptions -- which generally cover most computer programmers. As such, the law for computer programmers in California is very different from other states.
Nothing in the foregoing discussion is meant to be legal advice and does not serve to establish an attorney-client relationship. Any statements, on this page or elsewhere, are not guarantees of any outcome.
History of the Law
With the technology boom going on in California in the late 90's, many computer programmers were highly paid, but simply did not fit into any of the existing exemptions. Thus, a programmer making $100 per hour was still entitled to $150/hr if she worked more than 40 hours in a week. As a result, the California Legislature passed a law that took effect in 2001. It allows highly skilled and highly paid computer professionals who meet the strict requirements of the new exemption to be exempt from overtime pay.
Work Prior to January 1, 2006
The most important point of the 2001 law is that the exemption required that the employee be paid on an hourly basis. If you were paid a salary, you are not paid on an hourly basis and the exemption did not apply. There is no need to look at this exemption at all if you are paid a salary for work done prior to 2006. However, as there is a four year statute of limitations, unless you already have a pending lawsuit, you can not recover for this work.
Many companies mistakenly believed that by paying a salary that could be divided out to equal or exceed the required hourly rate, this would be allowed. However, this was not the law. If you are a computer programmer and are paid a salary close to $100,000 a year, it is possible that the company has improperly classified you under this exemption. You should contact me immediately as you could be entitled to significant overtime depending on how many hours you worked.
Work After January 1, 2006
For work after 2006, the employee can be paid a salary, but the exemption will be removed if the employee's wage ever drops below the minimum threshold wage. For 2006, that minimum threshold wage is $47.81 per hour. The important thing to note is that if you work more hours, your pay must remain above that threshold. As a result, the only flat salary that guarantees that you will meet this exemption's salary requirement is $417,689 per year.
To see how this works, consider the following examples: A salary of $99,445 will give you an hourly rate of $47.81, but only if you work 40 hours or less. As soon as you work 41 hours in a week, the exemption would fail. It also appears from the text of the law that it would fail for all the time you worked in that position, not just the one week that you happen to fall below. Thus, if your employer just wants to pay you a flat salary and you occasionally work some 50 hour weeks, the employer would have to pay you $124,306 per year to be safe. Even then, if you work 51 hours in one week, the exemption would fail. .
Work After September 30, 2008
In September of 2008, the California Legislature again modified the Computer Professional Exemption. This time, they allowed a fixed salary of $75,000 per year to be paid no matter how many hours are worked. As such, as long as this salary is paid, and the other requirements of the exemption are met, there is no right to overtime pay. For most computer programmers making more than $75,000 per year, this eliminates overtime. However, it should be noted that this only eliminates overtime for work performed after September 30, 2008. Even if you were making more than $75,000 prior to this date, unless you met the higher sliding scale salarys listed below, you are still entitled to overtime for that past work. There was no change in the hourly or salary rate in 2010. The rate is based on a type of inflation measure, and because this measure did not change in that year, the rate did not increase.
The following table gives the required rates of pay for the exemption:
| Salary Required for Hours in Work Week | ||||||
| Year | Hourly Rate | 40 | 50 | 60 | 70 | 80 |
| 2010 | 37.94 | $79,050 | $79,050 | $79,050 | $79,050 | $79,050 |
| 2009 | $37.94 | $79,050 | $79,050 | $79,050 | $79,050 | $79,050 |
| Sep 2008 | $36.00 | $75,000 | $75,000 | $75,000 | $75,000 | $75,000. |
| 2008 | $36.00 | $74,880 | $93,600 | $112,320 | $131,040 | $149,760 |
| 2007 | $49.77 | $103,522 | $129,402 | $155,282 | $181,163 | $207,044 |
| 2006 | $47.81 | $99,445 | $124,306 | $149,168 | $174,029 | $198,890 |
| 2005 | $45.84 | NA | NA | NA | NA | NA |
| 2004 | $44.63 | NA | NA | NA | NA | NA |
| 2003 | $43.58 | NA | NA | NA | NA | NA |
| 2002 | $42.64 | NA | NA | NA | NA | NA |
Alternate Pay Methods
Many employers choose to pay a salary because it is easy. However, as you can see, this makes complying with this exemption difficult. In addition, the employer must still keep track of all hours worked so that they can prove that you didn't accidentally fail the minimum threshold in any week.
As a result, some employers have implemented pay plans that pay a flat salary for hours worked up to 40 in a week and then pay the minimum rate for hours over 40. This minimum rate ($47.81 for 2006) may be less than what your salary is. For instance, if you make a salary of $125,000 a year, this is approximately $60/hr for the first 40 hours. They then pay you $47.81 for hours worked over 40. Even though the second rate is less than your standard rate, it still complies with the exemption and is a valid method of paying computer professionals, provided that you meet all the other requirements of the exemption.
Text of the Law
The following it the text of the law. As you can see from reading it, not only is the minimum pay requirement difficult to meet, but you really must be a high level programmer. Note that the law makes reference to $41.00. This was the rate in 2001. The rates above are the ones in effect for the years after that.
California Labor Code §515.5
(a) Except as provided in subdivision (b), an employee in the computer software field shall be exempt from the requirement that an overtime rate of compensation be paid pursuant to Section 510 if all of the following apply:
(1) The employee is primarily engaged in work that is intellectual or creative and that requires the exercise of discretion and independent judgment, and the employee is primarily engaged in duties that consist of one or more of the following:
(A) The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications.
(B) 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.
(C) The documentation, testing, creation, or modification of computer programs related to the design of software or hardware for computer operating systems.
(2) The employee is highly skilled and is proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering. A job title shall not be determinative of the applicability of this exemption.
(3) The employee's hourly rate of pay is not less than forty-one dollars ($41.00) thirty-six dollars ($36.00), or the annualized full-time salary equivalent of that rate, provided that all other requirements of this section are met and that in each workweek the employee receives not less than thirty-six dollars ($36.00) per hour worked. The Division of Labor Statistics and Research shall adjust this pay rate on October 1 of each year to be effective on January 1 of the following year by an amount equal to the percentage increase in the California Consumer Price Index for Urban Wage Earners and Clerical Workers.[The strike out text refers to pre-2008 law]
(b) The exemption provided in subdivision (a) does not apply to an employee if any of the following apply:
(1) The employee is a trainee or employee in an entry-level position who is learning to become proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering.
(2) The employee is in a computer-related occupation but has not attained the level of skill and expertise necessary to work independently and without close supervision.
(3) The employee is engaged in the operation of computers or in the manufacture, repair, or maintenance of computer hardware and related equipment.
(4) The employee is an engineer, drafter, machinist, or other professional whose work is highly dependent upon or facilitated by the use of computers and computer software programs and who is skilled in computer-aided design software, including CAD/CAM, but who is not in a computer systems analysis or programming occupation.
(5) The employee is a writer engaged in writing material, including box labels, product descriptions, documentation, promotional material, setup and installation instructions, and other similar written information, either for print or for onscreen media or who writes or provides content material intended to be read by customers, subscribers, or visitors to computer-related media such as the World Wide Web or CD-Roms.
(6) The employee is engaged in any of the activities set forth in subdivision (a) for the purpose of creating imagery for effects used in the motion picture, television, or theatrical industry.
Conclusion
If you spend more than 50% of your time writing code and are paid on a salary basis, you are likely entitled to overtime pay. If you think your employer has misclassified you or that you do not meet the salary requirements, you should contact my office and see if we can help.