Some Computer Software Engineers are Exempt

Some persons working in the computer software industry are exempt from California’s Wage Orders. The Wage Orders set forth the exemption. Here’s the computer software exemption from Wage Order 4-2001:

(h) Except, as provided in subparagraph (i), an employee in the computer software field who is paid on an hourly basis shall be exempt, if all of the following apply:

(i) The employee is primarily engaged in work that is intellectual or creative and that requires the exercise of discretion and independent judgment.

(ii) The employee is primarily engaged in duties that consist 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 documentation, testing, creation, or modification of computer programs related to the design of software or hardware for computer operating systems.

(iii) The employee is highly skilled and is proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering. A job title shall not be determinative of the applicability of this exemption.

(iv) The employee’s hourly rate of pay is not less than forty-one dollars ($41.00). The Division of Labor Statistics and Research shall adjust this pay rate on October 1 of each year to be effective on January 1 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 hourly rate of pay required for an exempt computer software professional as of January 1, 2011 is $37.94 or annual salary of not less than $79,050 for full-time employment, and paid not less than $6,587.50 per month. Click here for the California computer software exemption minimum pay rates for past years.

The Wage Orders go onto describe who would NOT be an exempt computer software engineer. Below is an excerpt from IWC Wage Order 4-2001:

(i) The exemption provided in subparagraph (h) does not apply to an employee if any of the following apply:

(i) 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.

(ii) 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.

(iii) The employee is engaged in the operation of computers or in the manufacture, repair, or maintenance of computer hardware and related equipment.

(iv) 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 in a computer systems analysis or programming occupation.

(v) The employee is a writer engaged in writing material, including box labels, product descriptions, documentation, promotional material, setup and installation instructions, and other similar written information, either for print or for on screen media or who writes or provides content material intended to be read by customers, subscribers, or visitors to computer-related media such as the World Wide Web or CD-ROMs.

(vi) The employee is engaged in any of the activities set forth in subparagraph (h) for the purpose of creating imagery for effects used in the motion picture, television, or theatrical industry.

Computer Software Engineer Exemption Analysis

To clarify, the DLSE Enforcement Manual explains the exemption:

[Exempt computer software engineers must] earn thirty-six dollars ($36.00) per hour for each hour worked, to be adjusted annually by the Division of Labor Statistics and Research (DLSR) on October 1 of each year to become effective January 1 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. This adjustment will be posted on the DLSR website annually, and:

b. [The exempt computer software engineers must be] primarily engaged in work that is intellectual or creative and requires the exercise of discretion and independent judgment, and

c. [The exempt computer software engineers must] meet the duties test set out at Section 2(h)(ii) of the [California Wage] Orders, and

d. [The exempt computer software engineers must must be highly skilled and proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering within the meaning of Labor Code § 515.5 and exceptions thereto as defined in Labor Code § 515.5(b);

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