New Exempt & Non-Exempt Pay Requirements
December 22, 2014
A variety of minimum pay standards in California will increase soon.
Exempt Software Professionals
In order to treat software professionals as exempt from overtime, California employers generally need to meet the requirements of the “computer software professional” exemption. The term “software professionals” covers positions such as software engineers, programmers, developers, analysts, and others classified as exempt based upon their software-development-related work. This exemption has had a special, heightened minimum salary requirement for the last several years. The California Department of Industrial Relations has announced that the minimum pay requirements for exempt computer software professionals will increase effective January 1, 2015, based upon an increase in the California Consumer Price Index. Effective January 1, 2015, the minimum salary for an exempt computer software professional will increase from $84,130.53 to $85,981.40 per year (from $7,010.88 to $7,165.12 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, 2015, California raised the minimum hourly rate for exempt computer software professionals from $40.38 to $41.27.
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 industry positions, or to an employee who has “not attained the level of skill and expertise necessary to work independently and without close supervision.” The consequences of failure to satisfy either the compensation or duties requirement for exempt status are substantial: the positions affected would be deemed non-exempt, and the employer would be liable for overtime back pay (and other amounts).
San Jose, San Francisco & Oakland Minimum Wage Increases
Effective January 1, 2015, the minimum wage in the City of San Jose will increase from $10.15 to $10.30 per hour based upon an annual consumer price index adjustment. The minimum wage in the City and County of San Francisco will increase from $10.74 to $11.05 per hour effective January 1, 2015, and then to $12.25 effective May 1, 2015 (with further yearly increases scheduled through 2018). Beginning March 2, 2015, the minimum wage in the City of Oakland will be $12.25 per hour under a new municipal code provision. Prior to March 2, 2015, the general California minimum wage ($9 per hour) applies in the City of Oakland.
Recommendations
We recommend that employers regularly review their wage practices to ensure legal compliance. We believe it is particularly important for employers to work with legal counsel to confirm the propriety of “exempt” status classifications, and classification of workers as “contractors,” to avoid common compliance mistakes with respect to such classifications.
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