Authored by Kerry Friedrichs
As technology continues to expand and evolve, employers increasingly are needing the services of highly-skilled computer programmers, software engineers, systems analysts, and similar employees. Often, these employees desire flexibility and autonomy in their work schedules. Fortunately, the FLSA and California law enable employers to offer flexibility to these employees, as they both provide a complete minimum wage and overtime pay exemption for employees engaged in certain computer-related occupations.
The FLSA and California computer employee exemptions are very similar in two important respects. First, these exemptions have nearly identical duties requirements, covering the same types of high-level computer-related positions. Second, both exemptions contain compensation requirements that permit employees to be paid on a salaried or an hourly basis, provided that the employee is paid an amount that meets the required minimum salary or hourly pay levels.
The fact that the FLSA and California exemptions are so similar often enables employers with operations inside and outside of California to consistently classify their high-level computer employees. However, such employers must remember that California’s compensation minimums are significantly higher than the FLSA’s minimums, and that California’s hourly compensation minimum adjusts annually (unlike the FLSA’s hourly minimum, which is not subject to annual adjustment). Therefore, employers relying on California’s computer employee exemption must review employees’ compensation levels annually to ensure that each employee is paid at a rate that is at least the required minimum amount.
The fact that the FLSA and California exemptions are so similar often enables employers with operations inside and outside of California to consistently classify their high-level computer employees. However, such employers must remember that California’s compensation minimums are significantly higher than the FLSA’s minimums, and that California’s required compensation levels adjust annually (unlike the FLSA’s minimums, which are not subject to annual adjustment and will not be affected by DOL’s proposed regulatory amendments which would increase the salary levels for the “white collar” exemptions). Therefore, employers relying on California’s computer employee exemption must review employees’ compensation levels annually to ensure that each employee is paid at a rate that is at least the required minimum amount.
The annual compensation review also may be a good time for employers to evaluate their exempt computer employees’ work duties to ensure that they continue to meet the requirements for exempt status. Below are the duties and compensation requirements for the FLSA and California exemptions.
To qualify as an exempt computer employee under the FLSA and California law, the employee must be employed as a systems analyst, computer programmer, software engineer, or in a computer position requiring similar skills, and must have a primary duty that consists 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 design, documentation, testing, creation or modification of computer programs related to computer operating systems.
In California, the employee must be “primarily engaged” in one or more of the above duties, meaning that the employee must spend more than 50% of the employee’s work time engaged in such duties. In addition, California law specifically provides that certain computer-related positions do not qualify as exempt. The exemption does not apply if any of the following criteria are met:
- The employee is a trainee or employee in an entry-level position who is learning to become proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering;
- The employee is in a computer-related occupation but has not attained the level of skill and expertise necessary to work independently and without close supervision;
- The employee is engaged in the operation of computers or in the manufacture, repair, or maintenance of computer hardware and related equipment;
- The employee is an engineer, drafter, machinist, or other professional whose work is highly dependent upon or facilitated by the use of computers and computer software programs and who is skilled in computer-aided design software, including CAD/CAM, but who is not engaged in computer systems analysis, programming, or any other similarly skilled computer-related occupation;
- The employee is a writer engaged in writing material for print or for onscreen media or who writes or provides content material intended to be read by customers, subscribers, or visitors to computer-related media; or
- The employee is engaged in any of the activities set forth in subdivision (a) for the purpose of creating imagery for effects used in the motion picture, television, or theatrical industry.
The FLSA does not contain such a list of specific positions that do not qualify for the computer exemption. However, courts and the DOL have reached similar conclusions with respect to the scope of the FLSA’s computer exemption, finding, for example, that employees engaged in IT support or “help desk” positions, or the manufacture or repair of computers, do not meet the computer exemption requirements.
The FLSA’s computer employee exemption requires that the employee be paid on a salary basis at a rate of not less than $455 per week, or on an hourly basis at a rate not less than $27.63 an hour. While California law also permits computer employees to be paid on a salary or an hourly basis, the required levels are significantly higher. Beginning January 1, 2016, computer employees must be paid on an hourly basis at $41.85 per hour, or on a salary basis at a salary of at least $7,265.43 per month (or $87,185.14 per year). These amounts are adjusted each October (to be effective at the beginning of the next calendar year) in accordance with the California Consumer Price Index for Urban Wage Earners and Clerical Workers.