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DOL Says Information Technology Staff May Be Essential, but Not Necessarily Exempt From Overtime

November 27, 2006

Many employers correctly believe that their information technology (IT) support staff, who troubleshoot computer problems and keep IT systems running, perform work that is essential to the company’s business operations. Employers should be aware, however, that while the functions these employees perform may well be critical, the Department of Labor (DOL) ordinarily deems these individuals to be non-exempt employees who are entitled to overtime pay, as noted in a recent Opinion Letter signed by the Administrator of the Wage and Hour Division published on October 26, 2006 (FLSA2006-42). See http://www.dol.gov/whd/opinion/FLSA/2006/2006_10_26_42_FLSA.htm

The DOL’s Wage and Hour Division was asked by a company establishing a new position of IT Support Specialist whether the position would qualify as exempt from the overtime provisions of the Fair Labor Standards Act (FLSA) as a "bona fide administrative employee" (29 C.F.R. § 541.200(a)) or as a "computer employee" (29 C.F.R. §§ 541.400(b) and 541.700(a)). According to the employer, the IT Support Specialist was expected to spend the following amounts of time on these duties: 55% troubleshooting and resolving complex computer problems with little supervision; 20% helping users identify needs and installing new computers and applications; 10% designing and testing systems; 5% analyzing needs and selecting vendors from which to purchase equipment and software; 5% documenting guidelines for the entire organization; and 5% monitoring and responding to automated alerts. Determining the employee’s entitlement to overtime was particularly important as the employer planned to have one or more IT Support Specialists working or on-call 24 hours per day, resulting in a large number of overtime hours.

Administrative Exemption

To qualify for the administrative exemption, the employee must be paid a salary of not less than $455 per week and, in addition, the employee’s "primary duty" must be the "performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers" (29 C.F.R. § 541.200(a)(2)) and must "include the exercise of discretion and independent judgment with respect to matters of significance." (29 C.F.R. § 541.200(a)(3)).

Although many employers deem their IT staff to be indispensable as their businesses could barely function if the computer systems did not work, this does not necessarily mean that all employees performing computer-related tasks are exempt. According to the DOL’s Opinion Letter, the mere fact that "significant consequences or losses may result from improper performance of an employee’s duties" does not qualify the work as being "significant to the management or general business operations of an employer." Citing prior cases and FLSA regulations, the DOL explained that "[i]ndeed, a job may even be viewed by an employer as ‘indispensable’ and still not meet the requirement that its primary duty be "directly related to the management or general business operations."  (citing Clark v. J.M. Benson Co., 789 F.2d 282, 287 (4th Cir. 1986) (regulations emphasize that the exemption depends on the nature of work, not its ultimate consequence) and 29 C.F.R. § 541.202(f)).

The fact that IT personnel often work without any direct supervision also does not mean that their primary duty involves the exercise "discretion and independent judgment." The duties of the IT Support Specialist position at issue in the Opinion Letter primarily involved "[m]aintaining a computer system and testing by various systematic routines to see that a particular piece of computer equipment or computer application is working properly according to the specifications designed by others." The DOL therefore concluded that the position did not involve the requisite "discretion and independent judgment."

Computer Employee Exemption

The IT Support Specialist described in the Opinion Letter also did not qualify as an exempt "computer employee." Quoting the FLSA regulations, the DOL found that requirements of the exemption were not met because the employee’s "primary duty" was not one or a combination of the following:

-application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;

- design, development, documentation, analysis, creation, testing or modification of computer systems or programs; or

- design, documentation, testing, creation or modification of computer programs related to machine operating systems.

C.F.R. § 541.400(b). According to the employer’s description, only 5% to 10% of the duties of the position, not the "primary" duty, involved participating in the design of computer systems and selecting new technology. As such, the position was not of the type that would fit within the exempt computer employee category: computer systems analysts, computer programmers and software engineers. Employers should be aware, however, that the duties of employees in these classifications must also meet the criteria quoted above, as job titles alone are not determinative.

The bottom line: employers may justifiably view their IT support staffs as essential, valuable and even indispensable employees. But unless their duties meet the rigorous standards set forth in the FLSA regulations governing the administrative or computer employee exemptions, they are non-exempt employees, entitled to overtime pay. Employers must also remember that employees that the FLSA deems exempt, may still have to meet different requirements to qualify for state law exemptions. See, e.g. New California Law Exempts Some Highly-Paid Software Professionals From Receiving Overtime.