New California law narrows overtime regulations for skilled tech workers


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Tech companies glum about their sagging stock prices can take cheer in a bill Gov. Arnold Schwarzenegger has signed into law that aims to make it easier for employers to determine which of their workers are exempt from overtime compensation.

A number of technology companies, including Sony, Electronic Arts, Apple and Cisco Systems, had been tripped up by California’s overtime regulations, which stated that highly skilled technology workers earning less than $75,000 a year, or $36 an hour, were entitled to OT.


Sounds simple, but the devil is in the math. Companies have contended that as long as the worker’s annual salary was at least $75,000, he or she was exempt from overtime pay, regardless of how many hours the employee clocked. Labor advocates have countered that the number of hours worked matters very much: They argued that the regulation in fact required companies to pay $36 or more for each hour worked, or else the employee was due OT.

As a result, programmers, engineers and graphic artists have filed lawsuits in recent years demanding overtime compensation for working long hours without extra pay. Some, including Sony and EA, have paid tens of millions of dollars to settle those cases.

The new law, which Schwarzenegger signed late Tuesday and took effect immediately, eliminates the hourly calculation. It says employers can instead meet the overtime exemption by paying their workers a gross salary of at least $6,250 a month. That equals the same $75,000 a year, but it means that high-tech companies now don’t have to worry about keeping track of the number of hours their employees work, said Carol Freeman, a partner at law firm Morgan, Lewis & Bockius in Palo Alto. ‘There was an ambiguity in the law, and this clarifies that,’ Freeman said.

Labor advocates said the law, which applies only to highly skilled tech workers, opens the door for companies to force employees to work unlimited hours without paying them anything extra.

‘Instead of hiring another worker, companies can just save money by making their existing workers clock twice as many hours,’ said Caitlin Vega, legislative advocate for the California Labor Federation.

The new law, however, does not clarify one controversial point about the overtime exemption: whether extra compensation such as stock options, bonus or profit-sharing count toward the $75,000 annual figure. So if you’re a highly skilled tech worker making $60,000 a year in salary and $20,000 more in extra compensation that’s paid out in equal monthly installments, who knows if you’re due overtime?

-- Alex Pham