30 Million Reasons Why Systems Administrators May Not Be Overtime-Exempt

Does your company have I.T. employees? Do you pay them a salary? That makes them computer professionals, right? So they’re probably exempt from federal and state overtime laws right? Well, hold on. The Computer Employee Exemption is, overall, poorly understood by employers — and even attorneys. Many employers get this one wrong. I’ve posted on this subject before. (Click here for review). So, you may be wondering, why am I writing about it again? Because it keeps coming up. In fact, it came up again this week. Based on a ruling from a federal court judge in Connecticut, approximately 1000 Systems Administrators employed by Computer Sciences Corporation are on track to receive approximately $30,000 in overtime pay. Read on and we’ll explore how and why their employer is in so much hot water and, of course, how you can avoid being in the same predicament.

Let’s get the basics out of way. The case is Strauch v. Computer Sciences Corporation, and, as I mentioned, it involves a class of approximately 1,000 employees who held the job title System Administrator. They were also salaried and not hourly employees. Now I know that to many that a salaried position as a System Administrator would sound like a Computer Professional that should be overtime-exempt, but bear with me here. I’ve said this before, and I’ll say it again, now: It’s not the job title that determines exempt or non-exempt status, it’s the functions the employee performs. Similarly, the salary alone will not render an employee overtime-exempt, his or her primary job functions must meet all the requirements of at least one exemption category. Last December, a jury unanimously found that these employees did not meet the requirements to be classified as exempt under the federal or state (California and Connecticut) Computer Employee exemption category. After a series of rulings regarding remedies last week, this employer, as I mentioned above is on the hook for at least $30 million in overtime pay.

Before getting further into the case, here are the requirements under federal law, aka the Fair Labor Standards Act:

• 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 Department of Labor, further states who is not an exempt computer professional, to wit:

The computer employee 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.

Let’s look now at the primary functions performed by the Systems Administrators in this case.  The jury unanimously found that these Systems Administrators’ primary duties consisted of routine installation and maintenance of computer hardware and software, troubleshooting and server maintenance. They were often assigned to be “on call” to handle troubleshooting tickets and perform other similarly nonexempt tasks 24/7/365. The jury also found that these employees did not make policy, design the systems, or do computer programming. As you can see, the primary duties performed by these employees fall far short of the requirements to be an exempt computer employee under the FLSA.  In addition to the FLSA though, many states add their own criteria in order for certain jobs to be overtime exempt. In this case, since many of the employees worked in either Connecticut or California, the additional requirements under those states’ wage and hour laws also applied.

By the way, did I mention that Computer Science Corp settled a similar nationwide class action lawsuit in 2005? I thought not.  That case was Giannetto v. Computer Sciences Corp., No. 03 Civ. 8201 (C.D. Cal.), and it involved the misclassification of computer support workers, resulting in a $24 million settlement. In other words, this employer knew or should have known better. Their latest  misstep is what we might call a willful violation.

So, here are a few takeaways for those of you with IT-type employees:

• If you have classified any such employees as exempt, review their primary duties and make sure they really fit within the exemption category;
• Remember that just because they don’t meet that category doesn’t automatically mean they are non-exempt, though. See if they might meet the criteria to be exempt under another category;
• If you believe you have misclassified one or more of your employees, speak with local employment counsel for guidance on how to address the issue; BUT
• Address any misclassifications in a timely manner;
• Remember in addition to the salary basis (or for this type of employee the hourly rate) it’s the primary job functions not the title that determines exempt status: AND FINALLY:
• Don’t overdo it with the turkey and pumpkin pie tomorrow!

See you next week.

Contents of this post are for educational/informational purposes only, are not legal advice, and do not create an attorney-client relationship. Consult with competent employment counsel in the state(s) in which you employ people with your specific questions.

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