The California Department of Industrial Relations has announced an increase to the pay rates that 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 Jan.1, 2023.
Background:
Computer software employees and physicians:
Under the 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 to $15.50 per hour on January 1, 2023, regardless of how many employees the employer has, the minimum salary threshold for these exemptions will also increase.
The Details:
Computer Software Employees: https://www.dir.ca.gov/OPRL/ComputerSoftware.htm
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, 2023, these employees must earn at least:
- $53.80 per hour (for all hours worked); or
- A monthly salary of $9,338.78; and
- An annual salary of $112,065.20
Physicians: https://www.dir.ca.gov/OPRL/Physicians.htm
To qualify for exemption from the state's overtime requirements in 2023, licensed physicians and surgeons are required to earn an hourly wage of at least $97.99.
Administrative, Professional, and Executive Employees:
For the administrative, professional, and executive exemptions, employers must pay a salary of at least $1,240 per week beginning January 1, 2023.
Next Steps:
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.
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