BILL ANALYSIS
AB 1012
Page 1
ASSEMBLY THIRD READING
AB 1012 (Nation)
As Amended May 9, 2005
Majority vote
LABOR & EMPLOYMENT 8-0 APPROPRIATIONS 17-1
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|Ayes:|Koretz, Nakanishi, Chan, |Ayes:|Chu, Sharon Runner, Bass, |
| |Chu, Houston, Klehs, | |Berg, Calderon, Emmerson, |
| |Laird, Leno | |Mullin, Karnette, Klehs, |
| | | |Leno, Nakanishi, Nation, |
| | | |Oropeza, Ridley-Thomas, |
| | | |Saldana, Walters, Yee |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Haynes |
| | | | |
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SUMMARY : Requires the Department of Industrial Relations (DIR)
to prepare an annual report on the impact of an existing
overtime exemption for computer software employees on the
retention in, recruitment to, and outsourcing from California of
computer consulting jobs, including the impact on the wages,
hours, overtime and working conditions of computer consultants
in California.
EXISTING LAW :
1)Requires the payment of overtime compensation at a rate of one
and one-half times the regular rate of pay for hours worked in
excess of eight in one day or 40 in one workweek.
2)Establishes an overtime exemption for employees in the
computer software field if all of the following apply:
a) The employee is primarily engaged in work that is
intellectual or creative and that requires the exercise of
discretion and independent judgment, and the employee is
primarily engaged in duties that consist of one or more of
the following:
i) The application of systems analysis techniques and
procedures, including consulting with users, to determine
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hardware, software, or system functional specifications;
ii) The design, development, documentation, analysis,
creation, testing, or modification of computer systems or
programs, including prototypes, based on and related to,
user or system functional specifications; and,
iii) The documentation, testing, creation, or
modification of computer programs related to the design
of software or hardware for computer operating systems.
b) The employee is highly skilled and is proficient in the
theoretical and practical application of highly specialized
information to computer systems analysis, programming and
software engineering;
c) The employee's hourly rate of pay is not less than $41,
as adjusted annually by the Division of Labor Statistics
and Research (DLSR).
3)Provides that the overtime exemption does not apply in other
specified circumstances, including where the employee is a
trainee or is engaged in the manufacture, repair or
maintenance of computer hardware and related equipment.
FISCAL EFFECT : Unknown
COMMENTS : SB 88 (Sher), Chapter 492, Statutes of 2000,
established the existing overtime exemption for highly
compensated computer professionals that perform specified
duties. At the time, it was argued that the computer
professionals covered by SB 88 were hourly employees and
therefore not eligible for the "professional" employee overtime
exemption under current law because they lacked an established
monthly salary.
In addition to the "duties" requirement to qualify for the
overtime exemption, SB 88 provided that the employee must
receive an hourly rate of pay of not less than $41. SB 88 also
required DLSR to annually adjust the hourly rate of pay by an
amount equal to the increase in the California Consumer Price
Index for Urban Wage Earners and Clerical Workers. Recently,
DLSR determined that, beginning January 1, 2005, to qualify for
the exemption, computer professionals must earn an hourly wage
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of at least $45.84 per hour.
The federal Fair Labor Standards Act (FLSA), which requires
overtime compensation after 40 hours in a workweek, provides for
a similar exemption for computer professionals paid at least
$27.63 an hour.
This bill is sponsored by the Northern and Southern California
Chapters of the National Association of Computer Consultant
Businesses (NACCB). According to a position statement issued by
NACCB, SB 88 was enacted just before the "dot.com" bust when
information technology (IT) services were booming and hourly
compensation rates were high. At the time, all highly skilled
computer professionals were paid in excess of $41 per hour.
However, NACCB argues that since the passage of SB 88, the IT
marketplace has declined and demand for IT professionals has
decreased, in part due to an increase in off-shore outsourcing.
Overall estimates of the total decline in IT professional
employment from its peak in 2000 range as high as 20%.
NACCB argues that, as a result of this decline, many IT
professionals who formerly earned above the $41 cutoff and were
treated as exempt for overtime purposes now have compensation
levels below the current cutoff and are considered to be
non-exempt and entitled to premium compensation for overtime
hours. As such, these employees are becoming increasingly
non-competitive in the marketplace and their positions are
easily exported to other states. NACCB supports reducing the
hourly cutoff rate of $41 to a figure "more in accord with
today's IT realities."
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091
FN: 0010522