Overtime and Professional Exemption for Computer/Software Engineers in California

In California, whether a computer/software professional is properly exempt from overtime compensation or whether he should be entitled to overtime is governed in large part by California Labor Code 515.5:

According to California Labor Code section 515.5, employees in the computer software field are not entitled to an overtime rate of compensation only if all four requirements are met:

(1) The employee is primarily engaged in work that is intellectual or creative and that requires the exercise of discretion and independent judgment.

(2) 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.

(3) The employee is highly skilled and is proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, or software engineering. A job title shall not be determinative of the applicability of this exemption.

(4) The employee’s hourly rate of pay is not less than thirty-six dollars ($36.00) or, if the employee is paid on a salaried basis, the employee earns an annual salary of not less than seventy-five thousand dollars ($75,000) for full-time employment, which is paid at least once a month and in a monthly amount of not less than six thousand two hundred fifty dollars ($6,250). The Division of Labor Statistics and Research shall adjust both the hourly pay rate and the salary level described in this paragraph 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.

There is hardly ever a dispute over the fourth factor, since it is easy to determine how an employee is actually paid. Most disputes and litigation of computer professional overtime claims revolve around whether (1) the duties were in fact high-level/intellectual enough to be classified as exempt and (2) whether performing those duties took more than 50% of the total work time of an employee in question.

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