The FLSA Computer Exemption

Image courtesy of watcharakun at FreeDigitalPhotos.net

Image courtesy of watcharakun at FreeDigitalPhotos.net

As promised, this week I am going to explore the FLSA computer exemption classification.

First, a bit of history, before 1990 employees employed in computer related occupations could qualify as exempt executive, administrative, or professional employees. But in 1990, the Secretary of Labor issued regulations that allowed “computer system analysts, computer programmers, software engineers, and other similarly skilled professional workers” to qualify as exempt executive, administrative, or professional employees as long as they were being paid an hourly rate of at least six and a half times the basic federal minimum wage which was $4.25 at the time. This made hourly computer employees exempt if they were paid at least $27.63 per hour and met the job duties test. This is where the unusual $27.63 per hour rate for computer employees comes from! The 1990 legislation treated computer employees as professional exempt employees if they met the job duties test and were paid at least $27.63 per hour.

The 1990 amendments were implemented in 1992 by the Department of Labor and the primary duties tests of computer professionals were added to the regulations.

Then in 1996, Congress amended the FLSA to add a specific exemption for computer employees and fixed the minimum hourly rate at $27.63 per hour. They also made into law, the defined primary duties of computer professionals from the 1992 regulations.

The most recent update to the computer classification occurred in 2004. The new regulations simplified the duties test for computer professionals. The regulations also replaced a “long and short” weekly pay test with the $455 per week test. Computer employees are exempt if they are paid at least $455 per week but if they are paid by the hour they are exempt if they are paid an hourly rate of $27.63. Of course in both cases they must also meet the duties test.

As I pointed out last week, the $455 per week equals an annual salary of $23,660 whereas the $27.63 per hour equals an annual salary of $57,470 – a huge difference. I was able to discover, as I reported earlier in this post, how this happened but find it curious that the $27.63/hour came about in 1990 and the $455/week came about fourteen years later in 2004. I was unable to uncover anything during my research but maybe one of my readers/listeners knows the reason behind this.

An important note to cover, the 2004 regulations also removed the requirement that exempt computer employees must consistently exercise discretion and independent judgment.

So in addition to the computer professional being paid an hourly rate of $27.63 per hour or on a salary or fee basis of at least $455 per week, they must also meet the primary duties tests including at least one of the following:

  • The application of systems analysis techniques and procedures, including consulting with users to determine hardware, software, or system functional specifications; or
  • 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; or
  • The design, documentation, testing, creation, or modification of computer programs related to machine operating systems; or
  • A combination of the duties listed above, the performance of which requires the same level of skills.

So there you have a brief history of how the computer exemption classification came about and where we are today. My next post and podcast will be on the executive exemption classification.

Note:  Please excuse the low quality recording of this week’s episode. I had to scramble to get it recorded and published and, as a result, the quality suffered. I promise to do better next week!!

Please note: I reserve the right to delete comments that are offensive or off-topic.

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