California's Labor Commissioner Adjusts "Professional" Overtime Exemption

January 23, 2007

Summary

California employers recently received some welcome clarification from the Division of Labor Standards Enforcement (“DLSE”) regarding the education requirement under California’s white collar overtime exemption for "learned professionals." In addition, employers should take note that the Department of Industrial Relations (“DIR”) has once again raised the minimum hourly rate for employees classified as exempt under the computer professional exemption.

Details

Learned Professional Exemption. Historically, the DLSE has taken the position that the learned professional exemption requires an educational degree above a bachelor’s degree (e.g., a Master's or Ph.D.). As of December 28, 2006, however, the DLSE amended its enforcement manual to delete this requirement. Instead, the DLSE will now only require an employee to have an “advanced degree.” This is defined as a person who, in order to perform his or her job, has completed a prolonged course of specialized intellectual instruction in a recognized field of learning resulting in the attainment of an advanced degree or certificate. Given this change, it now appears clear that the “advanced degree” requirement of the California professional exemption may be met when employees in a particular position are required to have at least a B.A. or B.S. degree in their field, or a specialized education certificate in the particular field in which they are employed. It should be noted, however, that few certification programs actually qualify as a “prolonged course of specialized intellectual instruction.”

With the DLSE’s recent revision to its enforcement position, California’s “advanced degree” requirement is now in line with the education requirement for the learned professional exemption under the federal wage and hour law, the Fair Labor Standards Act.

Computer Software Professional Exemption. An employee in the computer software field who meets certain duties requirements and is paid a specified minimum hourly rate may be classified as exempt from overtime. When California first enacted the computer professional exemption in 2001, the minimum hourly rate was $41.00. The DIR has steadily increased this rate each year. Effective January 1, 2007, the minimum hourly rate applicable to this exemption is $49.77.

Pursuant to Labor Code section 515.5, employers may compensate computer professionals on a salary basis of at least $103,522 per year, which is the annual full time equivalent of $49.77 per hour; however, the employee’s total income must still be at least $49.77 for every hour actually worked.

What This Means

The relaxation of the DLSE’s interpretation of the “advanced degree” requirement means that California employers no longer have to wonder if their professional employees without Master’s degrees are vulnerable to a misclassification finding by the DLSE. Although the class of employees whom this change should impact is narrow, it is nevertheless a welcome clarification. As to computer software professionals, employers should ensure that they are receiving at least the adjusted minimum hourly rate if they are relying upon this exemption.

This E-Update was authored by Denise Brucker and Lisa Hird Chung. For more information, please contact Ms. Brucker, Ms. Chung or any Paul, Plevin attorney at 619-237-5200.

Paul, Plevin, Sullivan & Connaughton LLP is pleased to announce that Robert W. Bell, Jr., Esq., has become Of Counsel to the firm.

Robert Bell is one of California’s premiere labor and employment litigators, having tried numerous jury and court trials and countless arbitrations during his distinguished career. Bob was a pioneer in Title VII trial work in California, and helped shape and establish the body of law in wrongful termination cases of all kinds. He is listed in The Best Lawyers in America and holds other similar honors and awards.

Bob was formerly Chair of the Employment group and a member of the Management Committee at Gray, Cary, and most recently headed the employment practice in Heller Ehrman’s San Diego office. He has served on the Board of La Jolla Country Day School, Gillespie School, and the Legal Aid Society of San Diego. Bob’s addition brings the compliment of employment lawyers at San Diego based Paul, Plevin to 21.

Bob can be contacted directly at (619) 744-3659, or rbell@paulplevin.com.