I need some help with the administrative exemption as it relates to IT workers. We are a software consulting firm. Each consultant works pretty independently, managing and doing work on their own projects directly with clients. Their work is a mix of upper-level tasks (systems analysis, training, project management) and lower-level tasks (installing upgrades and memory chips). We classify them all as exempt—is that a problem, do you think? — Eric in Stanton
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We asked Thomas N. Makris of Pillsbury Winthrop Shaw Pittman to handle this common, yet tricky, question.
The administrative exemption applies if the employee’s work is related to the general business operations of the employer or the employer’s customers. So, if you have a consultant who is assisting customers with developing, designing, and implementing their information technology structures, and the consultant is operating at a high enough level, then the exemption will apply.
How do you know what a high level is? Look for exercise of discretion and independent judgment, the importance of the decisions that the consultant is making or the level of the advice provided (and whether it is generally followed), and the importance of those decisions to the customer’s business. It is entirely possible that that type of consultant falls within the administrative exemption just as would, for example, an insurance specialist who advised clients, evaluated clients’ businesses, and advised the clients on what their insurance needs would be, or any number of similar area experts, technical experts in a particular field who advise customers on business needs. Beyond that, you need information about the specifics of the kinds of the tasks the person is doing.
The primary difference under California law for application of this exemption is that instead of looking at what the most important job duty is, you’ve got to look at everything the person spends his or her time doing and see if the exempt duties account for more than 50 percent of the time.
So, for example, in my firm, we have a person who is the full-time IT person. He makes sure all of our systems are up and running, fixes the computer when I dump a cup of coffee on the keyboard, installs all the systems upgrades, and troubleshoots any problems we have. All of those are nonexempt duties. He’s the top IT guy in our office, but nothing he does is conceivably within the range of duties that would support the exemption, because he’s not exercising discretion and independent judgment on matters of importance to the general operation of the business. He’s doing a service task.
By contrast, look at another top IT person in an another law firm who is charged with figuring out what’s happening in the legal profession in terms of use of IT, what’s available in the market in terms of software and hardware, what is a cost-effective way to acquire it, what’s the priority in which different upgrades should be instituted, and how do we schedule and train to get it all done. This person is really managing the whole process of keeping the IT department up to speed with the world around us. This person is very clearly exempt under the administrative exemption.
The line between exempt and nonexempt is really a matter of figuring out what, on an hour-by-hour basis, the person is doing. If they’re spending more than half of their time on that high-level evaluation, you get the exemption. If they’re spending more than half their time acting more as a service person, you don’t.”
Thomas N. Makris is counsel at the Sacramento office of law firm Pillsbury Winthrop Shaw Pittman.