Computer-Related Occupation Exemptions to Overtime Pay

The general presumption under California law is that everyone you employ is entitled to overtime for hours worked in excess of 8 in one day and in excess of 40 in one week. Eight categories of workers may be EXEMPT from this requirement under the Fair Labor Standards Act (FLSA) and the Industrial Welfare Commission (IWC) orders. One of the interesting recent areas of overtime law is the Computer-Related Occupation Exemption. This exemption exists because Department of Labor realized that there were a number of highly skilled, highly paid, functionally independent computer workers whose hours might vary wildly depending on the project. It is especially important in California, because of the high density of computer related occupations – and California has special rules governing it.

Computer-Related Occupation Exemption

In California this exemption derives from California Labor Code Section 515.5 and is often referred to as S.B. 88.

An employee may be classified as exempt under this definition if:

  1. The employee is primarily engaged in work that is intellectual or creative and that requires the exercise of discretion and independent judgment;
  2. Is primarily engaged in one or more of the following:
    1. The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications.
    2. The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on related to user or system design specifications.
    3. The documentation, testing, creation, or modification of computer programs related to the design of software or hardware for computer operating systems;
  3. Is highly skilled and is proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, or software engineering;
  4. Has an hourly rate of pay of not less than $39.90, or annual salary of not less than $83,133. This rate is updated annually. The current rate can be accessed online at http://www.dir.ca.gov/dlsr/ComputerSoftware.pdf

The exemption does not apply if:

  1. The employee is a trainee or in an entry level position learning to become proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering.
  2. The employee has not attained a sufficient level of skill necessary to work independently and without close supervision.
  3. The employee is engaged in the operation of computer or in the manufacture, repair or maintenance of computer hardware and related equipment.
  4. The employee is an engineer, drafter, machinist, or other professional whose work is highly dependent upon and skilled in computer-aided design software, but who is not in a computer systems analysis or programming occupation.
  5. The employee is a writer engaged in writing material intended to be read by customers, subscribers, or visitors to computer related media.

In simpler terms, an employee who qualifies for this exemption is someone who is highly paid, works largely in the creation, documentation, or testing of computer systems, and is skilled enough to operate with a large degree of independence. This exemption does NOT apply merely because an employee uses a computer to design other things, or uses computer programs for other purposes. If you have any questions about whether or not this exemption or any other overtime exemption is appropriate for your employees, please contact me.