California employers must ensure that compensation rates for exempt computer professionals meet updated salary thresholds, as of January 1, 2024.
The minimum wage thresholds for the California computer professional exemption have been raised in line with inflation.[1] The California Department of Industrial Relations (DIR) published a memo on October 17, 2023 increasing the compensation threshold for exempt computer professionals by 3.3% over the 2023 rates. The compensation rates are adjusted annually to account for inflation according to the California Consumer Price Index (CPI) for urban wage earners and clerical workers.[2]
Starting January 1, 2024, California employers must pay their computer professional employees a salary of at least $115,763.35 annually ($9,646.96 monthly) or an hourly wage of $55.58 for every hour worked in order to qualify for the California computer professional exemption.[3] In addition to the increased pay requirement, California computer professionals must also still satisfy the duties test set forth under Labor Code Section 515.5, which remain unchanged.[4]
It should be noted that the California test for computer professionals differs from the federal regulations under the Fair Labor Standards Act (FLSA). Under the US Department of Labor (DOL), employees in computer-related occupations currently must meet a salary of at least $684 per week ($35,568 per year) or an hourly wage of $27.63 per hour to qualify for the federal exemption. However, the DOL recently announced a proposed rule that would increase the federal salary thresholds for computer professionals to $1,059 per week ($55,068 per year) or an hourly wage of $27.63 per hour.[5]
The DOL also seeks to increase the federal threshold for the highly compensated employee exemption to $143,988, which provides another avenue for exemption where applicable in states outside of California, as the highly compensated employee exemption is not available in California.[6]
Employers with computer professionals in multiple states should consider how they will address pay rates across different states, particularly since the new California computer professional exemption salary is greater than the federal computer professional exemption.
[1] California will be increasing the minimum wage for all employees based on inflation in 2024. California will increase the state minimum wage by 3.5% to $16 per hour, which will also impact the state exemption threshold for white collar exemptions to $55,560 annually. While the state minimum wage is used for determining the applicable exemption threshold, given the number of remote workers in the post pandemic workforce, employers should carefully review each applicable jurisdiction, including the local city and county jurisdictions, in which their employees reside and work as the amount of minimum wage increases vary widely.
[2] The CPI is a measure of average change over time in the prices of fixed market goods and services and is considered to be an effective measure of inflation. For a history of annual percentage increase through 2020 only, see Division of Labor Standards Enforcement, History of Rate of Pay for Exemption for Computer Software Employee.
[3] Although California Labor Code Section 515.5 requires the DIR to update the salary level “on October 1 of each year to be effective on January 1 of the following year,” the DIR historically has failed to publish the updated salary level until a few days later. Changes by the US Bureau of Labor Statistics made in 2018 have delayed and will likely continue to delay updates to the CPI, and therefore also delay the DIR’s update on exemption salary level to mid-October. Despite the recurrent delays, there has been no effort to change California Labor Code Section 515.5 to allow employers more time to implement salary changes, which must still be in place by January 1.
[4] Previously, in 2023, California employers had to pay their computer professional employees a salary of at least $112,065.20 in order to qualify for the computer professional exemption.
[5] Department of Labor Proposes Raising Salary Level for FLSA ‘White-Collar’ Exemptions to $55,068
[6] Department of Labor Proposed Rule
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