New Laws for 2009: Overtime Exemption for Employees in the Computer Software Field

Assembly Bill 10 was passed effective October 1, 2008, to extend the exemption for employees in the computer software field to those paid on a salary basis.

Here's the background: In 2000, the legislature passed a bill (SB 88) providing that certain employees in the computer software field are exempt from the overtime compensation laws. In order to be exempt under the law in 2000, an employee had to:

(1) be "primarily engaged" in work that is "intellectual or creative and that requires the exercise of discretion andindependent judgment";
(2) be "primarily engaged" in certain duties that cover most of what employees in the computer software field do;
(3) be "highly skilled and proficient in thetheoretical and practical application of highly specialized information to computer systems analysis, programming, or software engineering"; and
(4) be paid an "hourly rate" of "not less than $41.00."

For a regular work year with 2,080 hours (not that any of you computer people work regular work years of 2,080 hours), this would equal $85,280. This "hourly rate" increased annually:

$42.64 per hour ($88,691) effective January 1, 2002;
$43.58 per hour ($90,646) effective January 1, 2003;
$44.63 per hour ($92,830) effective January 1, 2004;
$45.84 per hour ($95347) effective January 1, 2005;
$47.81 per hour ($99,444) effective January 1, 2006;
$49.77 per hour ($103,521) effective January 1, 2007.

That was it. I think the idea that a programmer earning $100,000 per year would not be exempt from the overtime law drove businesses nuts, and they worked hard to change the law. Effective January 1, 2008, the legislature brought the "hourly rate" of pay down to $36.00 ($74,880 per year).

But this still left a question about whether salaried employees could be exempt. Those of us who represent employees argued that the language of the statute meant what it said: that only employees who were paid on a hourly basis could be exempt, leaving salaried employees eligible for overtime compensation. And the legislative history backed that up. Defendants, of course, argued that it didn't matter whether someone was paid on an hourly or salary basis, as long as the math worked out.

Effective October 1, 2008, any employee meeting the other requirements of Section 515.5 is exempt from the overtime requirements as long as her or she earns not less than $36.00 per hour or not less than $75,000 per year, paid at not less than $6,250 per month.

Effective January 1, 2009, this rate started to climb back up. For year, anyone who meets the other requirements is overtime exempt as long as he or she earns an hourly rate not less than $37.94 or annual salary of not less than $79,050 for full-time employment, and paid not less than $6,587.50 per month.