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California Lawmakers Yield To The Computer Software Industry By Agreeing To Exempt Various Computer Professionals From California’s Overtime Laws

By Wendy A. Woldt

On September 16, 2000, California Governor Davis signed into law urgency legislation, which exempts various computer professionals in the computer software field from California’s overtime pay requirements. This new law, California Labor Code, section 515.5 (Senate Bill 88), becomes effective immediately.

Most California employers are subject to both federal and California wage and hour laws. As amended in 1996, applicable federal wage and hour laws contained in the Fair Labor Standards Act (“FLSA”) and its interpretative regulations have exempted various computer professionals from overtime pay requirements.

However, until recently, California did not provide any industry or occupational specific exemption for such employees. Thus, even though a computer professional might be subject to exemption under federal law, that same employee might not be exempt under California law.

This inconsistency meant that California employers effectively lost the benefit of the federal exemption because they were required to comply with applicable California overtime pay requirements to avoid the risk of liability for non-payment under California law even though their compensation practices were lawful under federal law. In this article, we examine the prior federal exemption, as well as the newly created California exemption for various computer professionals in the software field.

Under the FLSA, a computer professional in any field of endeavor is exempt from federal overtime pay requirements, if:

(1) The affected employee is compensated at a rate of at least $170 per week on a salary basis or $27.63 per hour, and

(2) The affected employee’s primary duty consists of one of the following:

• The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
• 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 modification;
• The design, documentation, testing, creation, or modification of computer programs related to machine operating systems; or
• A combination of the above duties, the performance of which requires the same level of skills. (29 U.S.C., §213(a)(17) and 29 C.F.R., § 541.303.)

Although no particular license, certification or academic degree is required for the federal exemption, it is not available to employees who hold trainee or entry-level positions. To be exempt, the employee must have attained a level of expertise that enables him/her to work independently, without close supervision.

The federal exemption does not apply to employees who operate computers, employees who manufacture, repair or maintain computers or employees whose work is highly dependent on or facilitated by the use of computers, but who are not engaged in computer systems analysis and programming occupations.

By comparison, under newly enacted California Labor Code, section 515.5 (“Section 515.5”), a computer professional in the “software field” is exempt from California’s overtime pay requirements, if:

(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:

• The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
• 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 modification; or
• 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 proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming and software engineering, and

(3) The employee’s hourly rate of pay is not less than $41 per hour. (This rate will be adjusted on October 1 of every year — to be effective 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.)

As expressly provided in Section 515.5, an employee’s “job title” will not be determinative of the applicability of this California exemption.

The new California law specifically provides that it is not applicable to the following employees:

• An employee who is a trainee or an employee in an entry-level position who is learning to become proficient in the theoretical or practical application of highly specialized information to computer systems analysis, programming and software engineering;
• An employee who is in a computer-related occupation but has not attained the level of skill and experience necessary to work independently and without close supervision;
• An employee who is engaged in the operation of computers or in the manufacture, repair or maintenance of computer hardware or related equipment;
• An employee who 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 analyst or programming position;
• An employee who 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 on screen 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; or
• An employee engaged in any of the activities set forth in the subdivision (a) for the purpose of creating imagery for effects used in the motion picture, television or theatrical industry.

The new California law is almost identical to its federal counterpart, save and except the omission the federal “catch all” duties requirement and the California requirement of an additional $13.37 in pay over the federal minimum hourly pay requirement. Accordingly, for California employers in the software field to insure their compliance with both laws, they must meet the California primary duties test — requiring their affected employees to perform one of the California required duties at least 50 percent of the time — and pay those employees at a rate which is at least $41 per hour.

To take advantage of this new California exemption, California employers in the computer software field should analyze the computer professionals in their workforce to insure the job requirements, job duties and compensation levels for those employees are consistent with these federal and California exemptions and revise their relevant jobs descriptions accordingly, subject to the advice and guidance of experienced employment law counsel. 

ABOUT THE AUTHOR

Wendy A. Woldt is an attorney with Woldt & Associates, a Professional Law Corporation providing employment law advice to management.

riskVue | The webzine for risk management professionals
November 2000