California employers must ensure that compensation rates for computer professionals meet new salary thresholds, effective January 1, 2025.
Employers must prepare now for the new computer professional exemption salary rates to take effect January 1, 2025. [1] The California Department of Industrial Relations (DIR) published a memo on October 14, 2024 increasing the compensation threshold for exempt computer professionals by 2.5% compared with the 2024 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]
To qualify for the California computer professional exemption, starting January 1, 2025 California employers must pay their computer professional employees a salary of at least $118,657.43 annually ($9,888.13 monthly) or an hourly wage of $56.97 for every hour worked. [3]
In addition to the salary requirement, a California computer professional must also satisfy the duties test set forth under Labor Code Section 515.5, including the requirement that employees exercise discretion and independent judgment while engaged in work that is intellectual or creative.
The California computer professional employee’s primary responsibilities must also include at least one of the following: [4]
The California computer professional must also be highly skilled and proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, or software engineering. The Labor Code also specifies certain duties that do not qualify. The changes in compensation threshold do not modify these duties tests.
The California test for a computer professional differs from the test applied by the federal Fair Labor Standards Act (FLSA). Under the FLSA computer employee standard, employees in computer-related occupations must meet the salary threshold for executive, administrative, and professional occupations or, if paid hourly, receive a wage of at least $27.63 per hour for all hours worked.
As with all employees, a computer professional’s salary rate is subject to overlapping federal, state, and local laws that govern the employment relationship. Employers with computer professionals across multiple states must closely evaluate their employees’ duties and pay to comply with federal and applicable state laws.
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[1] It should also be noted that many state and local laws, including California law, will be increasing the minimum wage for all employees in 2025. California will increase the state minimum wage to $16.50 per hour, which will also impact the state’s other exemption thresholds. Given the rise in hybrid work, employers should carefully review each applicable jurisdiction in which their employees reside and work, including the local city and county jurisdictions, as the amount of minimum wage increases may 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, see the 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. There has been no attempt 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] More than 50% of an employee’s worktime must be spent on one or more of these exempt duties. Cal. Lab. Code § 515(e).
[5] Cal. Lab. Code § 515.5(a)(2).