October 11, 2005
Computer Professionals and Overtime

Determining whether an employee should be exempt or nonexempt from overtime pay is always fraught with danger, but properly classifying a computer professional can be especially difficult.

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For one thing, such employees are usually presumed to be exempt, often for the simple reason that "professional" is part of their description. But the job actually entails may not always justify that classification, according to two employment law experts who recently held a BLR audioconference entitled, "Computer Professionals and Overtime: How to Classify Your IT Workers Correctly."

Tom Makris, a Sacramento, California-based lawyer with 20 years' experience in employment litigation, and Rick Olivieri, president of Olivieri & Associates, a compensation consulting firm in Concord , California , pointed to a variety of factors that are unique to IT personnel. Besides viewing themselves as professionals, Makris and Olivieri said, these workers tend to be highly trained, work irregular (and long) hours, work with little or no supervision, show a reluctance to keep time records, and often receive pay that's comparable to what managers receive.

But the federal Fair Labor Standards Act (FLSA) has specific guidelines for determining whether any worker is exempt for overtime pay. That wasn't always been the case, Makris acknowledged. But with the rewriting of the FLSA's exemption provisions two years ago, making the determination has gotten a lot easier.

Makris and Olivieri explained the five types of exemptions that might apply to IT workers under the law.


I. Computer Professional Exemption

To qualify for this exemption the employee, must be:

  • compensated at least $455 per week on a salary basis, or on an hourly basis of at least $27.63 per hour.
  • employed as a computer systems analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field.
  • have primary duties consisting of:
    • application of systems analysis techniques and procedures, including consulting with users to determine hardware, software, or system functional specifications; or
    • 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; or
    • design, documentation, testing, creation, or modification of computer programs related to machine operating systems; or
    • a combination of the duties described above, the performance of which requires the same level of skills.

This exemption does not include:

  • employees engaged in the manufacture or repair of computer hardware and related equipment.
  • Employees whose work is highly dependent on the use of computers and computer software programs, such as engineers, drafters, and others skilled in computer-aided design software, but who are not primarily engaged in computer systems analysis and programming.


II. Administrative Exemption

An employee who qualifies for this exemption is:

  • compensated at least $455 per week on a salary or fee basis.
  • primarily performs office or nonmanual work directly related to the management or general business operations of the employer or the employer's customers; or consists of the performance of administrative functions directly related to academic instruction or training in an educational establishment or department or subdivision of the establishment.
  • has primary duties that include the exercise of discretion and independent judgment with respect to matters
    of significance.


III. Executive Exemption

To qualifiy for this exemption, the employee must be:

  • compensated at least $455 per week on a salary basis.
  • have a primary duty consists of management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision of the enterprise.
  • be customarily and regularly directs the work of two or more other employees.
  • have the authority to hire or fire other employees, or his/her suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees are given particular weight.

IV. Professional Exemption

In the case of learned professionals, the qualifying employee must be:

  • compensated at least $455 per week on a salary or fee basis.
  • have a primary duty that consists of the performance of work requiring advanced knowledge in a field of science
    or learning customarily acquired by a prolonged course of specialized intellectual instruction.

If the employee is a creative professional, he or she must be:

  • compensated at least $455 per week on a salary or fee basis.
  • have as a primary duty the performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.


V. Highly Compensated Employees

An employee with total annual compensation of at least $100,000 is exempt if he or she:

  • customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative, or professional employee
  • earns at least $455 per week paid on a salary or fee basis
  • has the primary duty of performing office or nonmanual work

The employee's annual compensation may include:

  • commissions
  • nondiscretionary bonuses
  • other nondiscretionary compensation earned

The employee's annual compensation may not include:

  • Board, lodging, and other facilities
  • Payments for medical insurance
  • Payments for life insurance
  • Contributions to retirement plans
  • The cost of other fringe benefits
Order a CD-ROM containing the full 90-minute audioconference here.

 

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