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New California Law Exempts Some Highly-Paid Software Professionals From Receiving Overtime

October 13, 2000

Under the California Labor Code, employees who work in excess of eight (8) hours in a day or forty (40) hours in a week are generally entitled to overtime pay. A recent amendment to the Labor Code, effective September 19, 2000 (SB-88), has created a new exemption to these overtime requirements. Under SB-88, computer software analysts, programmers and engineers who are paid by the hour and receive $41 per hour or more, are exempt from eligibility for overtime pay. The new exemption also applies to several classes of health care professionals, such as registered nurses, certified midwives, anesthetists and nurse practitioners.

High-tech companies pushed for the bill in an effort to reduce labor costs associated with overtime paid to software designers, who frequently work long hours to complete projects under deadlines. The $41-per-hour rate minimum will be adjusted annually.

The scope of this new exemption is limited and includes numerous exceptions. For example, the exemption only applies to employees who are "primarily engaged in work that is intellectual or creative and that requires the exercise of discretion and independent judgment."

In addition, to qualify for the exemption, the employee must engage in specific job duties, such as:

Moreover, such employees must be "highly skilled and . . . proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering." Job titles are not determinative regarding the applicability of this legislation.

The exceptions to the SB-88 exemption include:

A similar federal law is already in place, exempting certain temporary computer programmers and other computer professionals who make at least $27.63 per hour from the overtime requirements of the Fair Labor Standards Act (the "FLSA"). Therefore, in application, computer professionals in California who are paid between $27.63 per hour and $41.00 per hour will continue to be entitled to overtime pay under state law.