Employers of California computer professionals must ensure compensation rates meet new salary thresholds that go into effect January 1, 2017.
In addition to reviewing compensation to ensure compliance with upcoming salary threshold changes issued by the US Department of Labor’s (DOL’s) Final Rule related to white collar overtime exemptions under the Fair Labor Standards Act (FLSA), California employers that rely on the state’s computer professional exemption should review compensation of their computer professional employees and make appropriate adjustments by January 1, 2017.
To qualify for the California computer professional exemption, employees must meet certain salary and job duties set forth under Labor Code Section 515.5. The compensation rates are adjusted annually for inflation according to the California Consumer Price Index (CPI) for Urban Wage Earners and Clerical Workers. Effective January 1, 2017, to qualify for the exemption, employers must pay their California computer professional employee a salary of at least $88,231.36 annually ($7,352.62 monthly) or an hourly wage of $42.35. This reflects an increase of 1.3% above 2016 rates.
In addition to the increased salary requirement, a California computer professional must also still satisfy the duties test set forth under Labor Code Section 515.5. The California computer professional employee’s primary responsibilities must include at least one of the following:
The California computer professional must also be highly skilled and proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, or software engineering. Moreover, the duties test generally requires the computer professional to be primarily involved in work that is intellectual or creative, and that requires the exercise of discretion and independent judgment. The Labor Code also specifies certain duties that do not qualify.
As a reminder, the increased salary requirements for FLSA white collar exemptions go into effect on December 1, 2016. FLSA Section 13(a)(1) addresses overtime exemptions under federal law for certain employees in computer-related occupations. However, given California’s higher salary requirement for computer professionals, the DOL’s Final Rule will not directly impact California’s computer professional exemption. As to white collar exempt positions, the new federal salary requirement will exceed California’s salary threshold until January 1, 2019, at which time the state’s salary requirement will again exceed the federal threshold.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
John S. Battenfeld
Carrie A. Gonell
Daryl S. Landy
Barbara J. Miller
Christopher J. Banks
Harry I. Johnson, III
Alicia J. Farquhar
Carol R. Freeman
Melinda S. Riechert
Michael D. Schlemmer
 Under these current rules, any salary updates should be in place by December 1, 2016. See our May 2016 LawFlash titled “DOL Updates FLSA Overtime Exemption Regulations.”
 The Consumer Price Index is a measure of average change over time in the prices of fixed market goods and services and is considered to be an effective measure of inflation.
 Although exempt from overtime, a computer professional paid on an hourly basis must be paid for every hour worked. When exempt employees are paid on an hourly basis, employers ought to protect themselves by ensuring an agreement with the employee is in place to guarantee a minimum salary in compliance with §515.5. To do otherwise may allow the employee to challenge their exempt status and receive overtime back pay. Negri v. Koning & Assoc., 216 Cal. App. 4th 392 (2013).
 While historic CPI rate data has generally resulted in a required salary increase, that has not always been the case. Between 2008 and 2009, the CPI decreased by 1.4%, and the DIR elected to maintain the then-existing rate. Similarly, although the CPI increased by 1.1% in 2010, the DIR elected to maintain the existing rate.
 More than 50% of an employee’s worktime must be spent on one or more of these exempt duties. Cal. Lab. Code § 515(e).
 Cal. Lab. Code § 515.5(a)(2).