2020 Exemption Updates: Check Your Employee Compensation

California law has a "minimum salary test" that employees must meet before they can be classified as exempt from wage and hour laws (overtime, breaks, lunches), along with a duties test. These salary rates will increase beginning January 1, 2020.

Here is some information on the new rates so you can prepare for 2020:

• Administrative, professional and executive exemptions require workers to earn 2x the state minimum wage for full-time employment in order to be classified as exempt (plus meet a strict duties test). This means that for 2020, a worker will need to earn at least $54,080 to be given a salaried exempt status if there are 26 or more employees and at least $49,920 to be given a salaried exempt status if 25 or fewer employees are in the company. For a handy chart outlining California exemption test increases, download CEA's Free Fact Sheet.

New rates for computer professionals and physicians and surgeons. California also provides an exemption from overtime requirements for computer professionals and physicians and surgeons. Certain criteria must be met, including these employees must be paid at least a minimum rate of compensation for the exemption to apply. California Department of Industrial Relations (DIR) adjusts minimum wage rates annually based on any increase in the rate of inflation.

• Effective January 1, 2020, the computer software employees' minimum hourly rate of pay exemption increases from the 2019 rate of $45.41 to $46.55 per hour. The minimum monthly salary exemption increases from $7,883.62 to $8,080.71. The minimum annual salary exemption increases from $94,603.25. to $96,968.33. More information is available on the DIR's web site: Overtime Rate for Computer Professional Exemption. CEA members can use the Exempt Analysis Worksheet—Computer Professional Exemption to determine the applicability of this exemption.
• Effective January 1, 2020, the licensed physicians and surgeons employees' minimum hourly rate of pay exemption increases to $84.79 per hour, up from the 2019 rate of $82.72 per hour. More information is available on the DIR's website: Overtime Exemption for Licensed Physician and Surgeons.