If you place Information Technology contractors in California, you will want to be aware of a recent change to their overtime rules. The minimum rate that Computer Professionals in California must be paid to be considered exempt from overtime has been increased to $40.38.
Under the Fair Labor Standards Act (FLSA), most American employees must be paid at a rate of 1.5 times their regular rate if they work over 40 hours per week. However, the FLSA does allow for certain employees who fall into specific job classifications to be exempt from overtime. In general, those exempt employees must be paid on a salary basis, but if they fall into the "Computer-Related Occupations" classification, they may be paid hourly and still be considered exempt as long as they are making no less than $27.63 per hour.
California sets a different minimum pay rate for Computer Professionals, which is adjusted yearly based on the California Consumer Price Index for Urban Wage Earners and Clerical Workers. There was a 1.2% increase in the Index, so effective January 1, 2014, Computer Professionals in California must be paid at least $40.38 to be considered exempt from overtime. To learn more, read the Memorandum on this increase at http://www.dir.ca.gov/oprl/ComputerSoftware.pdf
Recruiters running their own back-office for W-2 contractors will want to make sure their exempt Computer Professionals are still making enough to be exempt. But remember, it's more than just the pay rate that determines the proper classification. Their job duties must also align with the job classification, as dictated by the FLSA and any applicable state laws.