• State Issues 2017 Minimum Hourly Rates for the Computer Professional and Physician Overtime Exemptions
  • January 5, 2017 | Authors: Jeffrey P. Fuchsman; Richard S. Rosenberg
  • Law Firm: Ballard Rosenberg Golper & Savitt LLP - Encino Office
  • Background. Most of the federal and state overtime exemptions only apply to employees who are paid on a salary basis. However, overtime laws permit two groups of employees to be paid hourly and still be overtime exempt. They are so-called "computer professionals" and physicians. These exemptions are embodied in the California Labor Code. The State adjusts these hourly rates annually to keep up with inflation.

    Computer Professionals. For 2016, the minimum hourly rate for computer professionals is $41.85. Effective January 1, 2017, the new hourly rate for computer professionals increases to $42.35. The computer professional exemption also applies for employees paid $7,352.62 per month or $88,231.36 per year.

    Importantly, for the computer professional exemption to apply, the employees must also satisfy the "duties" requirements, which generally means they:

    (i) regularly spend more than half of their work hours on intellectual or creative work

    (ii) involving systems analysis, or the design, testing or development of computer programs or systems, and

    (iii) exercise independent judgment and discretion in the performance of their duties. (California Labor Code Section 515.5.)

    Note that this exemption is reserved for high-level computer analysts and the like. It does not apply to entry-level employees or trainees, employees who do not work independently, repair technicians, or employees who are not regularly engaged in computer systems analysis or programming.

    The federal Fair Labor Standards Act ("FLSA") also includes an overtime exemption for hourly paid computer professionals. Although the duties requirements are similar to the California exemption, the hourly rate is only $27.63 per hour. California employers must pay the higher hourly rate for the computer professional exemption to apply.

    Physicians. Licensed physicians working in California are covered by the so-called "professional" exemption if they are paid on a salary basis and earn at least $43,680 in 2017 (two times the State's minimum wage). However, California Labor Code Section 515.6 also includes a special overtime exemption for hourly-paid physicians and surgeons. Note, however, that this exemption does not apply to interns, residents, or to doctors covered by a union contract. The minimum hourly rate for this exemption is also increasing as of January 1, 2017 from $76.24 to $77.15.

    Likewise, the federal FLSA includes an exception for licensed doctors who are paid by the hour. Unlike California law, medical interns and residents are also covered by the federal exemption (29 CFR Sections 541.304(d), 541.600(e)), and there is no minimum hourly rate that must be paid to doctors for the federal exemption to apply. However, California health care employers must follow the more stringent state law requirements for those physicians working in California.