We are going to hire a number of computer workers. I’m writing job descriptions and have to establish whether these workers will be exempt or nonexempt. Can you help me with the “computer professional exemption”? — Roberto, HR Manager in Walnut Creek
Paying Overtime: 10 Key Exemption Concepts
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Both California and federal law provide exemptions for computer professionals from the legal obligation to pay overtime. The exemptions are written broadly to suggest that they may include such common job titles as computer programmer, systems analyst, and software specialist. However, they have been narrowly construed under federal law and have not been tested under California law.
Note: You have asked about the “computer professional exemption” that is discussed here. Computer workers may also be covered by two other exemptions, the professional exemption (for certain workers with highly specialized skills and training) and the administrative exemption (generally for those administering computer departments or systems). These two exemptions will be covered in a future issue of CELA.
The DOL recently issued an opinion letter concluding that certain IT support specialist positions fail to meet the computer professional exemption. Shortly thereafter, two substantial settlements in California class-action lawsuits involving IT employees were announced. A preliminary settlement of $27.5 million was filed in a class action covering approximately 800 Siebel Systems software engineers, and a preliminary settlement of $65 million was filed in litigation involving 32,000 current and former technical services and IT employees of IBM. To avoid these kinds of costly misclassification claims, employers should look past job titles and closely examine the work their computer professionals perform to determine whether the exemptions apply.
Computer Professional Exemptions
Although the California and federal computer professional exemptions largely overlap, notable differences exist, some of which were caused by the 2004 revisions to the federal regulations. (For details, see Section 515.5 of the California Labor Code; 29 U.S.C. Section 213(a)(17); 29 C.F.R. Sections 541.400-401.) Both cover employees engaged in work that primarily consists of one or more of the following:
- the application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications;
- 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; and
- the documentation, testing, creation, or modification of computer programs related to the design of software or hardware for computer operating systems.
In addition, to qualify, the employee must make at least $49.77 per hour or the annualized full-time salary equivalent, effective Jan. 1, 2007 (California), or $27.63 per hour or a salary of at least $455 week (federal).
Both exemptions exclude:
- employees engaged in the operation, manufacture, repair, or maintenance of computer hardware and related equipment; and
- employees whose work highly depends on or is facilitated by the use of computer programs and who are skilled in computer-aided design software, but who are not in a computer systems analysis or programming occupation.
The California computer professional exemption contains additional requirements and exclusions. For instance, the employee must also be:
- highly skilled and proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering and
- primarily engaged in work that is intellectual or creative and that requires the exercise of discretion and independent judgment.
Moreover, California’s exemption also excludes:
- trainees;
- employees who have not attained the level of skill and expertise necessary to work independently and without close supervision;
- writers engaged in preparing material such as documentation, installation instructions, or other material intended for customers;
- employees engaged in any of the otherwise exempt activities for the purpose of creating imagery used in the motion picture, television, or theatrical industry.
Because these required duties and exclusions are broadly and loosely defined, applying the exemptions to a diverse professional population is difficult. Given that computer professionals are generally well compensated, misclassification can result in costly overtime claims and class actions. Accordingly, although the advantages of classifying highly compensated computer professionals as exempt are obvious, the employer should take great care in evaluating the employee’s exempt status.
Applying the Computer Professional Exemption
While the California exemption has yet to generate either case law or labor commissioner opinion letters, the federal exemption has. Given the similarity between the two exemptions, and assuming the minimum pay requirement is met, employers may be guided to some degree by federal case law and U.S. Department of Labor (DOL) opinion letters. However, remember the following:
- Where the state and federal exemptions differ (e.g., with respect to the minimum compensation or California’s additional requirements or exclusions), the employee must satisfy both exemptions.
- The employer bears the burden of defending the classification as exempt.
- All exemptions from overtime will be narrowly construed, so use care in classifying employees.
Ultimately, only a subset of computer professionals will actually qualify for the exemptions. Exemption is more likely for employees engaged in the design or creation of the logic of a system of programs, documenting the internal processes involved in programming, or systems analysis.
Here are some examples, taken from real cases:
- A programmer primarily engaged in designing and developing programs, conducting intensive research to find out which technical steps were necessary to develop the program, analyzing data processing practices to develop solutions and recommendations for improvement, and writing new or modified code was exempt.
- A technical writer primarily documenting complex computer software life cycle programs and functions, based on and related to user and system design specifications, was exempt because her technical writing was directly related to software engineering, systems analysis, and computer programming.
- Customer training consultants providing training to customers’ employees in specialized computer software, manipulating and modifying software settings and specifications (e.g., toolbars and set-up) to meet customer needs (not including program writing or software development); installing, debugging, troubleshooting, and converting data; and testing customers’ equipment were not exempt because their duties did not involve determining hardware, software, or systems functional specifications or designing, developing, analyzing, testing, or modifying computer systems or programs.
- Systems engineers providing support services to customers and designing computer solutions to fit clients’ needs, including analyzing current equipment and software and identifying needs and devising implementation of and conversion to new systems, were not exempt because they did not design, create, or modify the systems or programs.
- An IT support employee primarily engaged in maintaining the computer workstation software, responding to “help desk tickets,” troubleshooting, repairing, and network documentation was not exempt because job duties did not involve computer programming, software engineering, or systems analysis.
Lloyd W. Aubry, Jr., Esq., former California labor commissioner, is of counsel at the San Francisco office of law firm Morrison & Foerster.