California Overtime: What the New Exemption Threshold Means

Los Angeles, CAA change in the California Overtime Law, and a lowering of the exemption threshold that came into effect in the New Year, translates to a win for employers in the computer industry, and a loss for those spending endless hours staring, hunched over, into a screen.

Following years of annual increases, as of January 1st 2008, the hourly wage threshold for overtime exemption for people working in the computer industry dropped from $49.77 per hour, to $36.00 per hour—a decrease of a whopping 27.65 per cent in one year.

While the fine print is complex and would take the services of a labor lawyer to understand and articulate all the various nuances, what this means in a nutshell is that it will now take a dramatically lower hourly wage to be considered, in general terms, as exempt from overtime.

To put it another way, an employer will have to pay you a lot less, in order to legally avoid paying overtime.

Of course, there are many employers who are avoiding the payment of overtime illegally, for various reasons. Some don't understand the exemption, or classification parameters associated with the law, and are duping you out of ignorance. Others are simply thumbing their nose at the law because they can.

If there's any good news to all of this, it's the right for computer workers to pursue unpaid overtime for a period of four years prior to 2008. In other words, the new rates and the update to the statute are not retroactive. Thus, if you feel you were owed overtime pay for any one, or a combination of years 2004 through 2007 inclusive, you still have the legal right to pursue it under the old threshold levels, which applied in each of those years.

As a rule, employers hate paying overtime.

One, it's expensive. Two, it's an uncontrolled cost. You can budget a workforce based on a 40-hour week, and you can have a lump sum budgeted to sit in a budget line that would serve as the source with which to pay overtime as the need arises. However it is difficult to control that cost, and there's little guarantee a budget will be spent long before, or remain in part once the fiscal year ends. It's a crapshoot.

Thus, an employer would rather pay the threshold rate of $49.77 or above, in order to ensure you qualify for the exemption and therefore mitigating the need for overtime pay in most scenarios.

Suddenly, that same employer gets that same benefit by paying you only $36.00 an hour (based on a 40-hour week). Now, she only has to pay you a maximum of $36.00 per hour to avoid paying overtime legally. Not only that, but the drop in the threshold translates to a corresponding reduction in the actual overtime rate.

It's a huge win for the employer, while employees lose money. Most mid-level computer employees would be making above $36 per hour. If you, for example, had been earning $48 per hour and therefore qualified for overtime pay as required, as of January 1st of this year you are suddenly exempt.

All that, with the stroke of a pen.

Those in the legal profession advocate that those employees owed back overtime from the previous four years should pursue a claim, especially given the reason why most unscrupulous employers routinely deny employees who qualify, the overtime they are due.

First, most employees will not pursue a claim for fear of job reprisal.

Second, most would choose small claims court as their initial course of action. However, California computer overtime claims are almost always tossed out based on a lack of expertise at the small claims court level, together with the sheer size and magnitude of the amount. Anything above, say $5,000 would be beyond such a court's purview.

An employee who loses a small claims court action might be forgiven for giving up.

A class action might be a route many would prefer, based on the relative annominity. However, for a class action to succeed there has to be a sufficient number of claimants with the EAXCT same job in the computer field, which is difficult to achieve. There are so many subtle nuances within jobs, at play. And finally, rarely does a class action get to trial. Rather, the parties will usually settle, at an amount that would be less overall than the employer would have had to pay out in overtime, had he played entirely by the rules in the first place.

Your best bet, experts say, is to launch an individual action with a California overtime lawyer. And here again, the employer will say, 'hey—bring it on.'

Why?

For every employee with the chutzpah to take his employer to court, there are probably a dozen or more who will not. Thus, in the end you will likely be paid every dime you are owed, plus a potential fee representing the lapse of time spent waiting for the funds when you could have had them, and finally an additional stipend tied to a confidentiality agreement preventing you from sharing your windfall with other employees.

You've won. And yet the employer still wins too, even though she has paid you every dime that is your due. That's because there are others on the floor who will likely not take the same path you did.

And she's still saving, thanks to California overtime law SB 929, Labor Code Sections 515.5 and 1773.9 that dropped the threshold and just made it easier, and cheaper for her to comply.

While the law is now on the books and in effect, there is still opportunity for any qualifying computer worker to pursue a legal claim for unpaid California overtime with a California overtime lawyer, for the preceding four years.

It's a no-brainer. Do. You lose ground, with every passing year.