A Software Engineer’s Guide to Overtime Pay

Below are some helpful questions and answers about how—and how much—software engineers in California should be paid.

How low is too low for a software engineer’s salary?

This may come as a surprise, but if you are a software engineer who works in California and receives a salary, the answer is simple.  You must be paid at least $85,981.40 annually.  Otherwise, if you are paid less, you may be entitled to overtime for any time worked over eight hours per day and over forty hours per week.

Does this mean that software engineers in California cannot legally be paid a salary of 85k?

Most likely yes.  California law is very specific:  In order for you, an engineer, to be exempt from overtime pay, you must be paid at least $85,981.40 annually.  The California Legislature set this annual salary in October 2014, to be effective January 1, 2015.  This is a 2.2 percent increase over last year’s salary requirement of $84,130.53.

What makes some California employees salaried but others eligible for overtime?

In general, employees in California must be paid hourly, which means they’re entitled to overtime.  Overtime pay is one-and-a-half times the regular hourly rate.  California law carves out a few exceptions to this general rule for employees—one exception is for software engineers who meet both this salary requirement ($85,981.40) and certain responsibilities requirements.  Only then can you be paid on a salary, without overtime compensation.

What other requirements must be met before a software engineer loses the right to overtime pay?

Generally the law looks to see that you exercise discretion and independent judgment in your position.  If you work under close supervision or are in an entry-level position, with little opportunity for independent creativity, then you are most likely entitled to overtime pay.

You also must have considerable experience in your field and be involved in designing, creating, documenting or testing software applications or systems, in order to forfeit your right to overtime.

Keep in mind, a job title is not determinative in the eyes of the law.  Titles like “Engineer,” “Builder” or “Code Monkey” do not guarantee that the employee meets these exempt job duties.  For example, if your primary responsibility is to perform office IT support, then you may not meet these exempt criteria and may be entitled to overtime pay.

Doesn’t this mean that some employees working as software engineers are entitled to overtime pay?

Exactly.  If you do not earn $85,981.40 per year, then you should be paid hourly.   Or, if you do not meet the other responsibilities for exempt computer software employees, you are likely hourly.  Hourly employees are entitled to overtime pay, as well as meal and rest breaks.

There are a few carve-outs in the law for salaried positions, so while the computer professional exemption is the most likely carve-out for a software engineer, keep in mind that you may fall into another exemption if you manage employees or oversee the business.

My offer letter says I accepted a salaried, exempt position as a software engineer.  Could I still be eligible for overtime?

Yes.  The law does not look at what your offer letter or employment contract says.  Instead, it looks at how much you are paid and what responsibilities you have on a day-to-day basis.

Can stock options in lieu of salary count towards the salary requirement for software engineers?

No.  Many employers offer engineers a bundle of stock options in lieu of a competitive salary, hoping that you will stick around to vest and in the meantime work for a low salary.  These stock options do not count towards the salary requirement.

What rights does an engineer have to recover overtime pay?

If you think that you have been receiving a salary unlawfully, and that you’re entitled to overtime for all the hours you worked late or on the weekends, you have the right to correct the practice going forward and to recover your lost wages and penalties for the past.