California Labor Code Section 515.5 provides that employees in the computer software field who perform specific computer-related duties are exempt from the overtime requirements in Labor Code Section 510. In addition to a duties test, computer professionals must earn a statutorily specified minimum pay rate to be considered exempt. When Labor Code Section 515.5 was initially enacted, an employee had to earn at least $41.00 per hour to meet the exemption. Since its enactment, the Division of Labor Statistics and Research ("DLSR") has adjusted the rate on October 1 of each year by an amount equal to the percentage increase in the California Consumer Price Index for Urban Wage Earners and Clerical Workers. This adjustment has resulted in an increase in the hourly rate every year.  As of January 1, 2007, the minimum rate for the exemption was $49.77 per hour.

Senate Bill 929 recently amended Labor Code Section 515.5 to significantly reduce the baseline hourly rate computer workers must earn in order to be exempt from overtime.  The new rate will be $36.00 per hour or an $74,880.00.  This new rate will become effective January 1, 2008.  Given that many software engineers and other computer professionals often work long hours and sometimes perform services from home or other non-office locations, tracking the hours of computer professionals is critical.  If an employer fails to adhere to the requirements of the exemption, the employer can be liable for any additional wages owed as well as possible penalties.  Accordingly, while many more computer employees may be classified as exempt as a result of the new amendment requirement, employers classifying computer professionals as exempt must be careful to ensure that all criteria are met.