Privacy, Business and Law

Both the federal law and California law provide exemptions from overtime wage requirements for executive, administrative, and professional employees, provided established criteria are met. Except for computer professionals, federal law requires exempt employees to be compensated on a salaried basis.

The federal law specifically contains a provision that allows computer professionals to be treated as exempt professional employees even if they are paid on an hourly basis. Until this year, the California exemptions only required the exempt employees to receive sufficient remuneration, whether salaried or hourly. However, AB 60, which became effective on January 1, 2000, inserted a provision that required a minimum monthly salary instead of a minimum monthly remuneration.

AB 60 created a huge problem for companies who employed computer professionals, because while high-tech computer professionals are generally paid two to three times the statutory requirement, they are often paid on an hourly basis. Therefore, if these companies continued to employ their highly paid computer professionals on an hourly basis without paying them overtime, they would be in violation under AB 60. In an attempt to alleviate this problem, SB 88 was introduced as urgency legislation. SB 88 essentially adopts the federal law, exempting a professional employee in the computer software field from overtime requirements if the employee meets other specified conditions and even if paid hourly. However, the major difference is that while federal law requires exempt computer professionals to be paid no less than $27.63 per hour, SB 88 would require exempt computer professionals to be paid no less than $41 per hour, to be adjusted annually in accordance with increases in the consumer price index.

On May 25, 1999, SB 88 was passed by the California Senate. The California Assembly unanimously approved SB 88, with very minor amendments, on July 6, 2000. The bill will now go back to the Senate for action on the amendments. Assuming the amendments are approved by the Senate, the bill will then go to Governor Davis for his approval. Governor Davis has already indicated that he will sign the bill, and because SB 88 is urgency legislation, it will go into effect immediately upon his signature.

In analyzing SB 88, the following comments were made by California’s legislature: This bill is intended to exempt from overtime pay, computer professionals who work for companies that assign them, on a temporary basis, to other companies to provide programming and related services as specified. These computer professionals are hourly employees and are therefore [currently] not eligible for a professional exemption from overtime requirements, because they lack an established monthly salary.

SB 88 includes a list of activities which disqualify an employee from the exemption, as well as specifying in detail the intellectual or creative duties which would qualify an employee for this exemption. The exemption only applies if the employee is primarily engaged in one of the following categories of specified duties: (1) the application of systems analysis techniques and procedures to determine hardware, software, or system functional specifications; (2) the design, development, documentation, analysis, creation, testing, or modification of computer systems or programs based on user or system design specifications; or (3) the documentation, testing, creation, or modification of computer programs related to the design of software or hardware for computer operating systems. However, the exemption does not apply if the employee (1) is a trainee or in an entry-level position; (2) has not attained the level of skill and expertise necessary to work independently and without close supervision; (3) is engaged in the operation of computers or in the manufacture, repair, or maintenance of computers; (4) is engaged in a profession 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; (5) is a technical writer; or (6) is engaged in creating imagery for effects used in the motion picture, television, or theatrical industry.