Exemptions in California can be very confusing. Trying to determine whether an employee is exempt from overtime or non-exempt and entitled to overtime is difficult, and this is especially true with IT professionals. While IT professionals are usually salaried employees, salary alone does not mean they are not entitled to overtime.
So what are IT professionals? IT professionals (i.e. Information technology professionals) can hold a variety of job titles – a few examples include: IT specialists, systems administrators, systems engineers, IT technicians, database administrators, desk and IT support, and network operations engineers or specialists. However, whether an IT professional is exempt or non-exempt does not depend on the title, but comes down to the duties. Because most IT professionals work long hours, it is especially important to determine whether as an IT professional, you are entitled to overtime pay.
Most IT professionals, if truly exempt, will generally fall under one of two exemptions: (1) the computer professional exemption; and (2) the administrative exemption (although other exemptions may sometimes apply).
The Computer Professional Exemption
Under California Labor Code Section 515.5, employees in the computer software field are exempt and therefore not entitled to overtime ONLY if ALL of the following four requirements are met:
(1) The employee is primarily engaged in work that is intellectual or creative and that requires the exercise of discretion and independent judgment.
(2) The employee is 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.
(3) The employee is highly skilled and is proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, or software engineering. A job title shall not be determinative of the applicability of this exemption.
(4) The employee’s hourly rate of pay is not less than thirty-six dollars ($36.00) or, if the employee is paid on a salaried basis, the employee earns an annual salary of not less than seventy-five thousand dollars ($75,000) for full-time employment, which is paid at least once a month and in a monthly amount of not less than six thousand two hundred fifty dollars ($6,250). The Division of Labor Statistics and Research shall adjust both the hourly pay rate and the salary level described in this paragraph on October 1 of each year to be effective on January 1 of the following year by an amount equal to the percentage increase in the California Consumer Price Index for Urban Wage Earners and Clerical Workers. Effective January 1, 2016 the minimum hourly rate is $41.85 and the minimum annual salary is $87,185.14 for full-time employment, and paid not less than $7,265.43 per month.
So in short, what does this all mean?
While there is no bright line rule, this means generally that to be considered exempt under the Computer Professional Exemption, employees must be:
- Exercising independent discretion and judgment – this generally means that the employee makes decisions over significant matters and is free of direct supervision;
- Highly skilled and proficient – this generally excludes trainees, entry level positions, and those learning to become proficient or those not at a skill level that does not require supervision;
- Primarily engaged in intellectual or creative work and one or more of the duties listed above – generally, “primarily engaged” means more than one-half of the employee’s work time.
- Earning no less than $41.85 per hour or $87,185.14 per year/$7,265.43 per month (as of January 1, 2016).
The Administrative Exemption
Under the Industrial Welfare Commission (IWC) Wage Orders, an employee falls under the Administrative Exemption ONLY if ALL of the following requirements are met:
- you must perform “office or non-manual work directly related to management policies or general business operations;”
- you must “customarily and regularly exercises discretion and independent judgment;”
- you must regularly and directly assist the owner of the business, or another exempt administrator OR do specialized or technical tasks that require special training or education and only under general supervision OR do special assignments and tasks only under general supervision;
- you must be engaged in these administrative duties more than 50% of your work time; and
- you must also earn a monthly salary equivalent to no less than two times the state minimum wage for full-time employment ($41,600 per year or $3,466.67 a month).
With the Administrative Exemptions and IT professionals, many times the question of exemption really comes down to whether the IT professional is performing tasks and functions that involve matters of substantial importance to running the business OR is simply engaged in the core day-to-day business.
If you are an IT professional and want to know whether you are properly classified, please consult with one of our attorneys.