Overtime exempt status of IT workers

With the new overtime exemption regulations going into effect on August 23, your existing staff will be more aware of the criteria for an “exempt” position. Your IT staff is exempt, right? Better check these criteria to be sure.

Is the Salaried IT Staff Headed for a Collision with Your Organizations Salary Practice?

With the new regulations going into effect August 23rd, your existing staff will be more aware of the criteria for an “exempt” position. Remember what the publicity of Clarence Thomas and Anita Hill did for harassment complaints. With this being a political year, the entire change in the Exempt Staff regulations is getting high levels of publicity. In addition, your staff members will have easy access to the new regulations on the U.S. Department of Labor website.

For a computer employee to qualify for the Exemption under the Computer-Related Occupations, they must meet the following tests and salary basis requirements. The employee must be compensated either on a salary or fee basis at a rate not less than $455 per 40 hour week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour. The two amounts are not the same.

The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;

The employee’s primary duty must consist of:

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

2. 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;

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

4. A combination of the aforementioned duties, the performance of which requires the samlevel of skills.

Positions That are not Exempt:

The computer employee exemption does not include employees engaged in the manufacture or repair of computer hardware and related equipment. Employees whose work is highly dependent upon, or facilitated by, the use of computers and computer software programs (e.g., engineers, drafters and others skilled in computer-aided design software), but who are not primarily engaged in computer systems analysis and programming or other similarly skilled computer-related occupations identified in the primary duties test described above, are also not exempt under the computer employee exemption.

Depending upon the circumstances, an employee may qualify as an exempt employee under one of the other exemptions for executive, administrative, professional, or outside sales employees.

Other Problems That Can Nullify the Exempt Status

Making deductions from a salaried employee’s pay can be a dangerous area that can create a liability for back pay of all hours worked over 40 in a pay week. Being paid on a “salary basis” means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee’s work. Subject to exceptions listed below, an exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked. Exempt employees do not need to be paid for any workweek in which they perform no work. If the employer makes deductions from an employee’s predetermined salary, i.e., because of the operating requirements of the business, that employee is not paid on a “salary basis.” If the employee is ready, willing and able to work, deductions may not be made for time when work is not available.

Circumstances in Which the Employer May Make Deductions from Pay

Deductions from pay are permissible when an exempt employee: is absent from work for one or more full days for personal reasons other than sickness or disability; for absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness; to offset amounts employees receive as jury or witness fees, or for military pay; for penalties imposed in good faith for infractions of safety rules of major significance; or for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions. Also, an employer is not required to pay the full salary in the initial or terminal week of employment, or for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act.

Effect of Improper Deductions from Salary

The employer will lose the exemption if it has an “actual practice” of making improper deductions from salary. Factors to consider when determining whether an employer has an actual practice of making improper deductions include, but are not limited to: the number of improper deductions, particularly as compared to the number of employee infractions warranting deductions; the time period during which the employer made improper deductions; the number and geographic location of both the employees whose salary was improperly reduced and the managers responsible; and whether the employer has a clearly communicated policy permitting or prohibiting improper deductions. If an “actual practice” is found, the exemption is lost during the time period of the deductions for employees in the same job classification working for the same managers responsible for the improper deductions. Isolated or inadvertent improper deductions will not result in loss of the exemption if the employer reimburses the employee for the improper deductions.

Safe Harbor

If an employer:

(1) has a clearly communicated policy prohibiting improper deductions and including a complaint mechanism,

(2) reimburses employees for any improper deductions, and

(3) makes a good faith commitment to comply in the future,

the employer will not lose the exemption for any employees unless the employer willfully violates the policy by continuing the improper deductions after receiving employee complaints.

The new regulations are easier to understand then the old versions. This makes the situation an urgent one for employers. The wide distribution of the information requires that every employer should evaluate their current job classifications to make sure that they are in compliance with the new regulations. The Federal regulations apply to any Company that has Gross sales of $500,000 or more and/or is involved in Interstate Commerce. Companies that do not meet these requirements must look at the State regulations to see what the definitions are.

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