California has announced an increase to the pay rates computer software employees and physicians must receive in order to be exempt from overtime. The minimum salary required for the administrative, professional, and executive overtime exemptions in the state will also increase. These new rates take effect on January 1, 2021.
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. Their salary must be 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, 2021, the minimum salary thresholds for these exemptions will also increase.
Computer Software Employees:
Exempt computer software employees may be paid on an hourly or a salary basis. Beginning January 1, 2021, these employees must earn at least:
- $47.48 per hour (for all hours worked); or
- A monthly salary of $8,242.32; and
- An annual salary of $98,907.70.
To qualify for exemption from the state's overtime requirements in 2021, licensed physicians and surgeons are required to earn an hourly wage of at least $86.49.
Administrative, Professional, and Executive Employees:
For the administrative, professional, and executive exemptions, the 2021 minimum salary requirement differs based on the size of the employer:
- Employers with 26 or more employees: $1,120 per week.
- Employers with fewer than 26 employees: $1,040 per week.
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. Please contact your dedicated service professional with any questions.