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Pay Increases For Exempt Employees in 2017

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In order to be exempt from overtime pay, an employee must meet certain requirements.  These requirements are set forth in California’s Wage Orders and Labor Code sections.  Computer Software employees must meet the exemption criteria described in Labor Code § 515.5 et seq.  Licensed Physicians and Surgeons must meet the exemption criteria described in Labor Code § 515.6 et seq.

One criteria for the Computer Software and Licensed Physicians and Surgeons exemptions are that such employees must be compensated more than a minimum hourly and/or salary threshold.  Labor Code §§ 515.5 & 515.6 et seq. both state that the “department shall adjust” the minimum thresholds on “October 1” to be “effective on January 1” of the following year based on the “percentage increase in the California Consumer Price Index (CCPI) for Urban Wage Earners and Clerical Workers.”

The DIR announced rate changes for such exempt Computer Software employees.  Effective January 1, 2017, the new pay rates are as follows:

  • The minimum hourly rate of pay exemption increased to $42.39 from its previous rate of $41.85;
  • The minimum monthly salary increased to $7,359.88 from its previous rate of $7,265.43; and
  • The minimum annual salary exemption increased to $88,318.55 from its previous rate of $87,185.14.

To compare and contrast, the above pay increase elevates the pay for exempt Computer Software employees to 2002 levels.  In 2002, the minimum pay for exempt Computer Software employees was $42.64.  From 2002 to 2007, exempt Computer Software employees enjoyed significant annual pay increases as the CCPI yielded high percentage increases.  In 2007, such employees were earning a minimum of $49.77 per hour.  In 2008, the pay for exempt Computer Software employees dramatically plunged to $36.00 per hour pursuant to SB 929.  Since 2008, the minimum pay for exempt Computer Software employees have either increased or stayed the same based on the CCPI.

The DIR also announced the pay rate increase for the licensed physician or surgeon exemption.  For the licensed physician or surgeon exemption:

  • The minimum hourly pay for licensed physicians and surgeons increased to $77.23 from $76.24.

Unlike Computer Software employees, licensed physician and surgeons have enjoyed annual pay increase every year except 2010 and 2011 based on the CCPI.  In 2002, the minimum pay requirement was set at $55.00 per hour.  Such employees typically earn an annual raise ranging from approximately $1.00 to $2.00 per hour.  Over the last 15 years, the pay for exempt licensed physicians and surgeons increased by approximately $22.23 per hour!

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