California DIR updates overtime exemptions for 2017

The California Department of Industrial Relations has adjusted the overtime exemption rate for computer software employees, as well as the exemption rate for certain licensed physicians and surgeons. State law provides an exemption from overtime requirements for these employees if certain criteria are met, including that these employees must be paid at least a minimum rate of compensation for the exemption to apply. The minimum wage rates are adjusted annually based on any increase in the rate of inflation.

Specifically, California Labor Code Section 515.5 provides that certain computer software employees are exempt from the overtime requirements stipulated in Labor Code Section 510 if certain criteria are met. One of the criteria is that the employee’s hourly rate of pay is not less than the statutorily specified rate, which the department is responsible for adjusting on an annual basis. Assembly Bill 10, L. 2008, amended Labor Code Section 515.5 to extend the exemptions to salaried employees whose annual and monthly salaries are not less than the statutorily specified rates, which the department is also responsible for adjusting. These rates are to be adjusted each October 1 and become effective on the following January 1 by an amount equal to the percentage increase in the California Consumer Price Index for Urban Wage Earners and Clerical Workers. The Department has adjusted the computer software employee’s minimum hourly rate of pay exemption from $41.85 to $42.39, the minimum monthly salary exemption from $7,265.43 to $7,359.88, and the minimum annual salary exemption from $87,185.14 to $88,318.55, effective January 1, 2017, reflecting a 1.3% increase in the cost of living (State of California, Department of Industrial Relations, Office of the Director—Research Unit, Memorandum on the Overtime Exemption for Computer Software Employees, October 5, 2016, https://www.dir.ca.gov/oprl/ComputerSoftware.pdf).

California Labor Code Section 515.6 provides that certain licensed physicians and surgeons are exempt from the overtime requirements stipulated in Labor Code Section 510 if certain criteria are met. One of the criteria in the statute is that the employee’s hourly rate of pay be not less than a certain amount (originally, not less than $55.00, effective January 1, 2002). The department is responsible for adjusting this pay rate on October 1st of each year to be effective on January 1st 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. The Department has adjusted the licensed physicians and surgeons employee’s minimum hourly rate of pay exemption from $76.24 to $77.23 effective January 1, 2017, to reflect the 1.3% increase in the cost of living (State of California, Department of Industrial Relations, Office of the Director—Research Unit, Memorandum on the Overtime Exemption for Licensed Physicians and Surgeons, October 5, 2016, https://www.dir.ca.gov/oprl/Physicians.pdf).

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