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California raises minimum pay requirements for certain exemptions

11/07/19

Author: ADP Admin/Friday, November 1, 2019/Categories: Compliance Corner , State Compliance Update, California

The California Department of Industrial Relations has announced an increase to the pay rates computer software employees and physicians must receive in order to be exempt from overtime. Additionally, the minimum salary required for the administrative, professional, and executive overtime exemptions will also increase. These new rates take effect on January 1, 2020.


Background:

Computer software employees and physicians:

Under California Labor Code Sections 515.5 and 515.6, computer software employees and physicians are exempt from the state's overtime requirements if they meet specific duties requirements and earn a minimum pay rate. These pay thresholds are adjusted annually for inflation.

Administrative, executive, and professional employees:

California also has exemptions for bona fide administrative, professional, and executive employees. To be exempt from overtime, these employees must meet certain state salary and duties tests. They must be paid a salary of at least twice the state minimum hourly wage based on full-time employment of 40 hours per week. Since the state's minimum hourly wage will increase on January 1, 2020, the minimum salary thresholds for these exemptions will also increase.

Computer Software Employees:

Computer software employees may be paid on an hourly or a salary basis in order to qualify for exemption from California's overtime requirements. Beginning January 1, 2020, these employees must earn at least:

  • $46.55 per hour (for all hours worked); or
  • A monthly salary of $8,080.71; and
  • An annual salary of $96,968.33.

Physicians:

To qualify for exemption from the state's overtime requirements in 2020, licensed physicians and surgeons are required to earn an hourly wage of at least $84.79.


Administrative, Professional, and Executive Employees:

For the administrative, professional, and executive exemptions, employers with 26 or more employees must pay a salary of at least $1,040 per week beginning January 1, 2020. Employers with fewer than 26 employees must pay a minimum salary of at least $960 to these exempt employees.

Compliance Recommendations:

California employers with exempt employees should ensure that they meet the applicable salary and duties tests. Otherwise, these employees must be classified as non-exempt and are entitled to overtime.

https://www.dir.ca.gov/oprl/ComputerSoftware.pdf
https://www.dir.ca.gov/oprl/Physicians.pdf

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Tags: 11/07/19

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