$58.85 an hour, or $122,573.13 a year. That’s the 2026 pay floor for California’s computer software overtime exemption under Labor Code section 515.5, according to the Department of Industrial Relations. On January 1, 2027, the figures rise to $61.03 and $127,108.34. Pay is only half the test. The employee must also be highly skilled and primarily doing creative systems or programming work, and the employer must prove every element if an overtime claim follows.
What are the 2026 pay minimums for the computer software exemption?
For 2026, the minimums are $58.85 an hour, $10,214.44 a month, or $122,573.13 a year. The Department of Industrial Relations’ notice says it “has adjusted the computer software employee’s minimum hourly rate of pay exemption from $58.85 to $61.03, the minimum monthly salary exemption from $10,214.44 to $10,592.37, and the minimum annual salary exemption from $122,573.13 to $127,108.34 effective January 1, 2027.” The notice ties the change to a 3.7% increase in the California consumer price index.
The adjustment is automatic. Labor Code section 515.5(a)(4) directs the department to adjust “both the hourly pay rate and the salary level described in this paragraph on October 1 of each year to be effective on January 1 of the following year.”
Two details cause trouble. First, California allows the exemption for hourly workers, which federal law also does, but at a far higher rate. Second, under section 515.5(a)(4), a salaried employee’s pay must be “paid at least once a month and in a monthly amount of not less than” the monthly figure. An annual salary that meets the number but arrives in uneven installments can miss the monthly test.
If you have software employees near the line, I’d budget the 2027 raise now. Every January, a few salaries fall below the new floor because nobody adjusted them.
What duties does Labor Code section 515.5 require?
Four conditions, and all of them have to be met. Section 515.5(a) exempts an employee in the computer software field only if:
| Requirement | What the statute requires | Where claims usually attack it |
|---|---|---|
| Intellectual or creative work | “primarily engaged in work that is intellectual or creative and that requires the exercise of discretion and independent judgment” | Work done to specifications someone else wrote |
| Qualifying duties | Primarily systems analysis, or design, development, documentation, analysis, creation, testing, or modification of systems or programs | Time spent on support, operations, or project coordination |
| Skill level | Highly skilled, and proficient in the theoretical and practical application of highly technical information to computer systems analysis, programming, or software engineering | Junior staff, or staff who need close supervision |
| Pay | The hourly, monthly, or annual minimum, adjusted each year | Salary missed after a January increase |
Section 515.5(a)(3) also says “A job title shall not be determinative of the applicability of this exemption.” Calling someone a software engineer doesn’t make the person exempt. The question is what the person does all day.
California reads exemptions against the employer. In Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785, the Supreme Court of California said that “under California law, exemptions from statutory mandatory overtime provisions are narrowly construed” and that “the employer bears the burden of proving the employee’s exemption.” Discussing the outside salesperson exemption, the court also said the inquiry starts with “how the employee actually spends his or her time.” A footnote in the same opinion contrasted the federal “primary duty” test for the white-collar exemptions with the requirement in one California wage order that the employee be engaged “primarily” in exempt work, a term that wage order defines as “more than one-half the employee’s work time.” Section 515.5 uses the same “primarily engaged” phrase. In a dispute, expect the employee’s lawyer to argue for a time-based count, and keep records that can answer it.
Who is excluded from the software exemption even if well paid?
Section 515.5(b) lists employees who aren’t exempt no matter what they earn. They include a trainee or “employee in an entry-level position” who is still learning the work, an employee who “has not attained the level of skill and expertise necessary to work independently and without close supervision,” and, under section 515.5(b)(3), an employee “engaged in the operation of computers or in the manufacture, repair, or maintenance of computer hardware and related equipment.”
The list goes on to engineers and drafters who use CAD software but don’t do systems analysis or programming, writers of documentation and web content, and employees creating imagery for effects in the motion picture, television, or theatrical industry.
The help desk and IT support categories produce most of the disputes I’d expect. Someone who resets passwords, images laptops, and keeps the network running matters to the business, but that work likely falls within the exclusion for operating computers or maintaining hardware, not the design or programming work the exemption describes.
How does California’s software exemption differ from the federal one?
California asks for more. A recent federal case shows the gap.
On October 29, 2026, the U.S. Court of Appeals for the Sixth Circuit decided Bennink v. Cincinnati Bell Telephone Co., No. 26-3150, an opinion recommended for publication. It applied the federal Fair Labor Standards Act (FLSA), not California law, and held that an IT employee who documented and designed the company’s interactive voice response phone system was an exempt computer employee. The court said that “Notably absent from the statute is any requirement of a particular degree, level of education, or job title.” It explained that when Congress wrote the federal exemption in 1996, it dropped language from earlier federal regulations about education, independent judgment, and a high level of skill.
California’s statute takes a different approach. Section 515.5 still requires “discretion and independent judgment,” and an employee who is “highly skilled and is proficient in the theoretical and practical application” of highly technical information “to computer systems analysis, programming, or software engineering.” And the federal hourly minimum the Sixth Circuit applied was “$27.63 an hour,” well under California’s 2026 figure.
One part of Bennink does carry over as a practical lesson. The court looked past the employee’s description of his own work and the employer’s labels and examined his “actual duties.” It credited his documentation and design work on the phone system, and it also noted that “not all of Bennink’s work fell cleanly within the exemption” because he often acted as a project manager and relied on others to do the programming. A California court asking whether the same employee was “primarily engaged” under section 515.5 in qualifying work, and was highly skilled under section 515.5, could reach a different answer on the same facts. Federal cases like this one are context, not authority, for a California claim.
How do software misclassification claims reach employers?
Usually as an overtime demand from a departing developer, then as a lawsuit or a PAGA notice. If the exemption fails, Labor Code section 510 requires overtime “at the rate of no less than one and one-half times the regular rate of pay” for work over eight hours in a day or 40 in a week, and double time in some cases. Long hours are common in software jobs, so the back-pay number can grow fast, and other wage claims can follow on the same theory.
In my view, the strongest defenses are built before the claim. Job descriptions that match the real work, design documents and code commits that show who did the creative work, and pay that clears the floor every month give the employer the evidence Ramirez says it must produce. A company that can’t show what its engineers actually did is defending on titles, and titles don’t decide the exemption.
What should an employer gather after an overtime claim from a software employee?
Start the same week the demand or notice arrives:
- Preserve the records under a litigation hold: the employee’s job descriptions and offer letter, payroll records showing each payment, time or calendar data, ticketing and code-repository history, design documents, performance reviews, and emails and chat messages about the work.
- Calendar the deadline on the demand letter, PAGA notice, or summons, and check for an arbitration agreement and an employment practices liability (EPLI) policy with notice requirements.
- Identify the managers who assigned and reviewed the employee’s work, and make sure no one takes action against the employee or coworkers that could look like retaliation for raising the claim.
- Pull the documents the exemption depends on: proof of pay at or above the 2026 minimum for every month, and evidence of how the employee’s time actually divided between design or programming work and support, operations, or coordination.
- Talk to a lawyer before responding, contacting the employee or the employee’s lawyer, or offering anything to settle.
The firm’s California wage and hour defense page explains how overtime and misclassification claims are defended.
Software exemption questions from California employers
Can an hourly software developer be exempt from overtime in California?
Yes. Section 515.5 allows the exemption for an employee paid by the hour, as long as the hourly rate meets the hourly minimum ($58.85 in 2026 and $61.03 in 2027) and every duties requirement is met. Check that payroll pays the rate for every hour, not a lower blended rate.
Does a computer science degree matter for the software exemption?
Not directly. Section 515.5 doesn’t mention a degree. It requires an employee who is “highly skilled and is proficient in the theoretical and practical application” of highly technical information “to computer systems analysis, programming, or software engineering.” A degree can be evidence of that, and so can years of experience. What matters is the skill the employee brings to the actual work, and whether the employee works independently.
What if the employee’s salary meets the minimum but most of the job is IT support?
Then the exemption is at serious risk. Pay alone doesn’t make someone exempt. Section 515.5 excludes employees engaged in the operation or maintenance of computers and hardware, and it requires the employee to be “primarily engaged” in qualifying duties. Consider reclassifying or restructuring the role, and get advice on how to handle past pay periods.
Does the January 2027 increase apply to existing salaries?
Yes. The new minimums apply to pay earned on and after January 1, 2027, regardless of the offer letter, because the exemption depends on current pay. An employee whose salary stays at the 2026 level and falls below the new floor fails the pay requirement from that date.
If a former engineer is claiming overtime
If a software employee has sent an overtime demand or a PAGA notice, the pay records and the record of what the employee actually worked on usually decide the claim. Rosenberger + Kawabata represents employers defending employment lawsuits and claims through its business litigation practice, including claims involving exempt misclassification. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.
Sources
The statutes are Labor Code section 515.5 and section 510. The pay minimums are from the Department of Industrial Relations’ computer software employee notice. The California decision is Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785. The federal decision is Bennink v. Cincinnati Bell Telephone Co. (6th Cir. Oct. 29, 2026, No. 26-3150), recommended for publication.
This post is general information about California and federal employment law as of November 5, 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Employment statutes, regulations, and court decisions change often, and the outcome of any claim depends on its facts. Past results do not guarantee future outcomes.