What?! You May Have to Pay Your IT Employees Overtime?!

Suppose your business employs Brilliant Brenda as an  “IT” professional and  you pay her an $80,000 annual salary.  Brenda maintains the software on the company’s computer system, troubleshoots, and repairs problems, and installs software. You feel that Brenda performs complex functions, because they require special skills and knowledge. A year after her start date, Brenda informs you that she has kept records of all her work hours, that she worked 2000 hours of overtime, and that she is therefore entitled to over $75,000 in unpaid overtime. You are flabbergasted. Brenda is well-compensated, is paid on a salary basis, and you were advised that she is a computer professional who is exempt from overtime pay requirements. Can Brenda really be entitled to overtime pay? Join me after the jump to find out…

 Brenda’s job does not meet the Computer Professional Exemption criteria. Unless Brenda’s job fits within another FLSA exemption, she will in fact be entitled to overtime pay. Are you surprised? This is actually what  happened in Martin v. Indiana Michigan Power Co. No. 02-2343 6th Circuit 2004.  What is the reasoning? Why is someone like Brenda is not an exempt Computer Professional? This exemption is probably the least understood, and the most misused by employers. To qualify for the computer employee exemption, the following tests must be met:

• The employee must be compensated either on a salary or fee basis at a rate not less than $455 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour;
• The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;
• The employee’s primary duty must consist of:
  1. The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
  2. The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;
  3. The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or
  4. A combination of the aforementioned duties, the performance of which requires the same level of skills.

The Computer Professional exemption does not include employees engaged in the manufacture or repair of computer hardware and related equipment.  Employees whose work is highly dependent upon, or facilitated by, the use of computers and computer software programs (e.g., engineers, drafters and others skilled in computer-aided design software), but who are not primarily engaged in computer systems analysis and programming or other similarly skilled computer-related occupations identified in the primary duties test described above, are also not exempt under the computer employee exemption. (Click here to read the actual Fact Sheet on the Department of Labor‘s website.)

Brenda’s pay clearly meets the first requirement. The problem is that Brenda does not work as a programmer or analyst, software engineer, or  as a similarly skilled professional.  Her tasks do not involve designing, creating or modifying systems or programs either related to system design specifications or machine operating systems. Brenda ‘s tasks appear to be performed to pre-determined specifications in a system design created by others. This last fact, in particular, tends to weigh heavily against exemption as it did in Martin.

How about an IT professional who diagnoses, troubleshoots and attempts to solve customers’ software or internet connectivity problems? Nope, s/he  is not an exempt Computer Professional under the FLSA, even though his/her functions may include analyzing problems. Why not?  His/her duties do not include “determining hardware, software or system functional specifications” or “design, development, documentation, analysis, creation, testing or modification of computer systems or programs”. Even modifications to software or programs, if they are not the employee’s primary duty, either alone or in combination with functions enumerated above, and/or if they do not “relate to machine operating systems” are not exempt. This employee is essentially a technically proficient help desk employee, whose primary responsibility is customer service. That is how a court ruled in Hunter v. Sprint Corp 453 F.Supp.2d 44 (D.D.D.C 2006).  Similar positions where the primary responsibility is either training customers in specialized computer software or providing support to customers  and designing computer solutions to fit a client’s needs, even when doing so requires analyzing current equipment and software and identifying needs and devising and implementing the conversions to new systems, are not exempt.  Why? According to the Department of Labor, such a person is not designing, creating, testing, or modifying the actual system or program. (See DOL Op Ltr WHM 99:8273 Aug. 19, 1999, DOL Op. Ltr WHM 99:8373). 

Can anyone be an exempt Computer Professional? Yes. Here are examples of computer professionals who are correctly classified as exempt from overtime pay:

1. A computer programmer working on a JAVA programming project, who designs programs with minimal or no supervision, plans projects, develops solutions and recommendations for improvement, meets the criteria of designing or modifying computer programs related to machine operating systems and is therefore an exempt Computer Professional (See Berquist v Fidelity Information Services, Inc. 399 F. Supp. 2d 1320 (M.D. Fla. 2005). 
2. An employee who provides technical writing computer services to a telephone company is exempt,  because her duties include documentation of a complex computer software life cycle program and such functions are included as exempt duties under the DOL regulation, and her hourly pay rate was between $30.20 and $38.00 (See Morgan Chandler v. Consortium of Maryland, Inc.  3 WH Cases 2d 880 (MD Cir. Ct 1996). 

So what are the key take aways when trying to classify IT employees?

1. Not all jobs involving computers are necessarily complex or require exceptional expertise. This is a common misconception, leading to the knee-jerk reaction of incorrectly classifying all IT professionals as exempt.
2. Title and level of education will not necessarily determine status. Primary functions will.
3. Help Desk employees generally will not be exempt.
4. Anyone working within  pre-determined specifications is most likely non-exempt.
5. Primary functions will include design, creation, or modification of systems or such tasks performed in relation to machine operating systems, or analysis to determine hardware, software or system functional specifications. Generally courts will look to how much discretion and independent judgment is afforded the individual in determining whether his/her job is exempt.
6. Employers must prove by preponderance of the evidence (i.e. it is more likely than not) that the job is exempt from overtime.
7. Even an IT employee who is not an exempt Computer Professional, may still be exempt under another category, such as administrative (click here for a review) or highly paid executive, or some other category.

Next week The Emplawyerologist will explore some of the remaining “catch-all exemptions. In the meantime best wishes to all of you for an amazing 2014!

Disclaimer: This post’s contents are for informational purposes only, are not legal advice and do not create an attorney-client relationship. Always consult with competent local employment counsel on any issues discussed here.

Click here to learn more about Janette Levey Frisch, author of The Emplawyerologist.

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