California Department of Industrial Relations Raises Compensation Threshold For Computer Software Engineers, Licensed Physicians, and Surgeons Overtime Exemption

Pursuant to California Labor Code sections 515.5 and 515.6, some computer software engineers (CSE), licensed physicians, and surgeons are exempt from Section 510 overtime requirements. To be exempt, several criteria must be met, including, but not limited to, minimum compensation. On October 7, 2015, the California Department of Industrial Relations (DIR) adjusted the compensation portion of the exemption criteria for these professionals. The changes take effect on January 1, 2016.

Computer Software Engineers

The DIR sets threshold salary rates for CSEs. If a CSE is paid below the set rate, they cannot be exempted from Section 510’s overtime requirements. But, if they are paid at the minimum rate or more, and the other criteria of Section 515.5 are met, the CSE can be classified as exempt. Each year, the California Consumer Price Index for Urban Wage Earners and Clerical Workers (CCPI) measures cost of living changes and the DIR alters the compensation rates to reflect those changes. In 2016, the compensation increase will be 1.4 percent. Currently, CSEs must be paid an annual salary of $85,981.40 (or $41.27 an hour, or $7,165.12 a month) to meet the salary component of the exemption. Effective January 1, 2016, the minimum annual salary will increase to $87,185 (or $41.85 an hour, which is $7,265.43 a month).

Licensed Physicians and Surgeons

Section 515.6 applies to some licensed physicians and surgeons. Unlike Section 515.5, monthly and annual salaried employees are not included in the statute. As with CSEs, the DIR is responsible for setting the hourly compensation threshold. If a licensed physician or surgeon is paid less than the hourly rate, they cannot be exempted from Section 510’s overtime requirements. But, if they are paid more than the hourly rate, and the other conditions are met, they can be exempted under Section 515.6. Each year the DIR readjusts the hourly compensation threshold based on the CCPI’s cost of living calculation. In 2016, the compensation increase will be 1.4 percent. Currently, licensed physicians and surgeons must be paid $75.19 an hour to meet the salary component of the exemption. Effective January 1, 2016, the minimum hourly rate will increase to $76.24 an hour.

Other Section 510 Exempted Careers

CSEs, licensed physicians, and surgeons are not the only individuals with special treatment under Section 515. Private elementary and secondary teachers also get unique treatment. Under Section 515.8(b)(3), if a private school teacher earns less than the equivalent of two times the state minimum wage, they must be classified as non-exempt. California’s minimum wage is set to raise from $9.00 to $10.00 per hour on January 1, 2016.

Future Changes

The compensation rates are reviewed annually by the DIR. In October 2016, the cost of living in California will be reevaluated and changes to the CSE, licensed physician, and surgeon pays scales will be made. The 2015 scale will remain in effect until January 1, 2016, at which point the 2016 scales listed above will take effect.