California Announces 2026 Increase in Computer Professional Exemption Compensation Rate
October 28, 2025California employers must ensure that compensation rates for computer professionals meet new compensation thresholds as of January 1, 2026.
Each year, the California Department of Industrial Relations (DIR) sets the compensation threshold for the California computer professional exemption. [1], [2] On October 28, 2025, the DIR published a memo increasing the compensation threshold to $122,573.13 annually ($10,214.44 monthly), or an hourly wage of $58.85. [3] These new rates are set to take effect on January 1, 2026. This reflects an increase of 3.3% over 2025 rates and aligns with inflation rates over the last year as measured by the California Consumer Price Index (CPI). [4]
DUTIES TEST REMAINS UNCHANGED
In addition to meeting the compensation requirements outlined above, a California computer professional must also satisfy the duties set forth by California Labor Code Section 515.5 (which remain unchanged going into 2026), summarized below:
First, to qualify for California’s computer professional exemption, the employee must be primarily engaged in work that is intellectual or creative and that requires the exercise of discretion and independent judgment.
The employee must be 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 specifications.
- The documentation, testing, creation, or modification of computer programs related to the design of software or hardware for computer operating systems.
Additionally, the employee must be highly skilled and proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, or software engineering.
Finally, the California Labor Code specifies that certain roles or duties do not qualify for the computer professional exemption. [5]
FEDERAL EXEMPTION FOR EMPLOYEES IN COMPUTER-RELATED OCCUPATIONS DIFFERS FROM CALIFORNIA EXEMPTION
Under the Fair Labor Standards Act’s computer professional standard, employees in computer-related occupations are only required to meet a lower compensation requirement of $35,568 annually (or $27.63 per hour). Additionally, the FLSA duties test differs from that of its California counterpart (and other states have adopted their own variations). As such, employers should ensure that employees satisfy exemption requirements for both federal and applicable state law.
AI AND THE COMPUTER PROFESSIONAL EXEMPTION
Workplace utilization of artificial intelligence has increased dramatically in recent years. To date, the DIR has not released guidance, nor has case law clarified, how the use of AI might impact exemption status. However, critical to many exemptions is the regular exercise of discretion and independent judgment in matters of importance. While use of AI might supplement and serve as a tool, it should not be used to the exclusion of exempt employees’ exercising their own discretion and judgment. Employers should be cautious to ensure that employees utilizing AI tools at work continue to satisfy applicable classification requirements.
Contacts
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[1] Many state and local laws will also increase the minimum wage starting in 2026. For example, California will increase the state minimum wage by 2.49% to $16.90 per hour, which will also impact the state exemption threshold.
[2] California Labor Code Section 515.5 requires the DIR to update the salary level “on October 1 of each year to be effective on January 1 of the following year,” however, the DIR historically has failed to publish the updated salary level until a few days later. This year’s update, published on October 28, marks the most substantial delay in recent history. Changes made by the US Bureau of Labor Statistics in 2018 have delayed and will likely continue to delay updates to the CPI, and therefore also delay the DIR’s update on exemption salary level to mid-October. Despite the recurrent delays, there has been no effort to change Section 515.5 to allow employers more time to implement salary changes, which must still be in place by January 1.
[3] In 2025, California employers had to pay their computer professional employees a salary of at least $118,657.43 annually, or an hourly wage of at least $56.87 for every hour worked.
[4] The CPI 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.
[5] For instance, the exemption does not apply to employees who are engaged in the “manufacture, repair, or maintenance of computer hardware and related equipment.” Cal. Lab. Code § 515.5(b)(3).