The California Department of Industrial Relations has issued an announcement that the minimum pay requirements for exempt computer software professionals will increase effective January 1, 2013, based upon an increase in the California Consumer Price Index. Effective January 1, 2013, the minimum salary for an exempt computer software professional will increase from $81,026.25 to $83,132.93 per year (from $6,752.19 to $6,927.75 per month). By contrast, the salary requirement for the general “white collar” overtime exemptions (i.e., administrative, executive, and professional) remains at two times the minimum wage for full-time employment, which equates to $33,280 per year or $2,773.34 per month. California’s computer software professional exemption is one of the few overtime exemptions that also permits exempt status with pay on an hourly basis. Also effective January 1, 2013, California raised the minimum hourly rate for exempt computer software professionals from $38.89 to $39.90.
Importantly, employers must satisfy not only the pay requirements, but also strict tests regarding the employee’s duties in order to classify employees as exempt computer software professionals. For example, regardless of pay level, the exemption does not apply to entry-level software positions, or to an employee who has “not attained the level of skill and expertise necessary to work independently and without close supervision.”
If an employer misclassifies positions as “exempt” without satisfying both the duties and compensation requirements for exempt status, it will face substantial legal exposure: the positions would be deemed non-exempt, and the employer would be liable for overtime back pay (and other amounts). In light of the strict nature of the requirements for exempt status, and the serious consequences of noncompliance, we recommend that employers review their exempt classifications with guidance from employment law counsel.
Employers seeking further guidance on any of these issues may contact any of the firm’s lawyers listed below.