Question:

I am an employee who designs computer software programs.
I heard that the minimum wage under California law increased at the first of this year. I have been told that this increase affects the rate of pay to which exempt employees are entitled. Will this increase affect my rate of pay?

Answer:

On January 1, 2007, the California minimum wage amount increased to $7.50 per hour from $6.75 per hour. An additional increase in the California minimum wage to $8.00 per hour will take effect on January 1, 2008. These increases in the California minimum wage were signed into law by Governor Schwarzenegger on September 12, 2006, with the passage of SB 1835.

This increase in the minimum wage will affect exempt executive, administrative, and professional employees (i.e. those that do not have to be paid overtime). This is because the minimum salary requirement to qualify as an exempt employee is based on the state minimum wage. The minimum salary requirement to qualify as an exempt executive, administrative, or professional employee, is an amount equal to at least two (2) times the state minimum wage for full-time (40-hour) employment. Therefore, on January 1, 2007, in order for these employees to remain exempt under the California Wage Orders, they must receive a minimum salary of approximately $31,200 per year. In addition to the minimum salary requirement to qualify as exempt executive, administrative, or professional employee, these individuals must perform certain defined duties, and must customarily and regularly exercise discretion and independent judgment in performing those duties.

However, this increase in the minimum wage may not affect you, since based upon your job duties of designing computer software programs, you most likely fall within an exemption that is not tied to the minimum wage. You may fall within the “Computer Software Employee” exemption. As of January 1, 2007, under this exemption, an employee must receive a minimum hourly rate of $49.77 per hour, but is not entitled to overtime. This rate is not tied to the minimum wage, but is adjusted by the California Division of Labor Statistics and Research annually based on the increase in the California Consumer Price Index for urban wage earners and clerical workers.

Further, for an employee to fall within this exemption, the employee must be primarily engaged in work that is intellectual or creative and requires the exercise of discretion and independent judgment. The employee’s duties must primarily consist of 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 and related to, user or system design specifications, and 3) The documentation, testing, creation, or modification of computer programs related to the design of software or hardware for computer operating systems. The employee must also be “highly skilled” in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering.

Finally, if you fall within the exempt category of a “Computer Software Employee,” your rate of pay should necessarily be above the new minimum wage. If you do not fall within the “Computer Software Employee” exemption, your rate of pay must be at least the new California minimum wage of $7.50 per hour.
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