Computer Services Personnel: Overtime Pay Under the Fair Labor Standards Act

Publication Date: February 2005

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Labor

Type:

Abstract:

The Fair Labor Standards Act of 1938 (FLSA), as amended, is the primary federal statute in the area of minimum wages and overtime pay. Section 13(a)(1) provides, inter alia, that the Act's wage and hour (overtime pay) requirements will not apply to "any employee employed in a bona fide executive, administrative, or professional capacity ...." Through administrative rulemaking, the Secretary of Labor has established two tests through which to define eligibility under the Section 13(a)(1) exemption: a duties test and an earnings test.

The Department of Labor (DOL), through many years, had defined a professional as one who has undergone "a prolonged course of specialized intellectual instruction and study, as distinguished from a general academic education and from an apprenticeship." After a review of then-current practice in the field, DOL (in a series of decisions beginning in the 1960s) decided that it was not able to determine that computer services workers were "professional" for Section 13(a)(1) purposes. Thus, such workers continued to be fully covered by the wage and hour provisions of the FLSA.

In 1990, Congress adopted free-standing legislation directing DOL to promulgate regulations defining the status of computer services workers and to include in that definition an earnings test: not less than 6? times the federal minimum wage. Although DOL proceeded as directed, Congress revisited the issue in 1996. It removed the computer services exemption from Section 13(a)(1), creating a new categorical exemption in Section 13(a)(17). Here, unburdened by the issue of defining professional, Congress set its own standard. It also froze the earnings test at $27.63 per hour -- decoupling it from the general minimum wage. With the increase in the general wage floor, part of the 1996 amendments, that came to equal 5.4 times the minimum wage.

Some might argue that the rationale for exemption of computer services personnel, in the absence of a significant hearings record, may not be entirely clear. Further, given the broad definition of a computer services professional in the legislation, for example, some may question which workers in the industry would not be exempt. Still, legislation continued to be introduced that would have broadened the exemption further. None, however, was enacted.

However, in the spring of 2004, the Administration's revision of Section 13(a)(1) of the FLSA, dealing with compensation for executives, administrators, or professionals, provided yet another option for employers of computer professionals. The new rate, under Section 13(a)(1) would provide a new reduced rate for such workers. This paper explores treatment of computer professionals under the FLSA.