Do We Have to Pay Our Computer Programmers Overtime?

July 8, 2019

Certain classes of highly skilled workers in our economy are exempt from having to be paid overtime. This article focuses on which of the ever-increasing number of information technology (IT) jobs are classified as exempt from overtime pay under Wisconsin law.

Nature, Number of IT Jobs Increasing at Rapid Rate

According to the U.S. Bureau of Labor Statistics (BLS), employment of computer and IT occupations is projected to grow by 13 percent between 2016 and 2026. That’s faster than the average for all other occupations. The demand is driven by an increasing emphasis on cloud computing, the collection and storage of big data, and information security.

IT workers command high wages. The BLS has indicated that the median annual wage for IT professionals was $84,580 in 2017, while the median annual wage for all other occupations was $37,690. (The 2018 data wasn’t available at press time.) Given the increasing number of highly skilled workers in the IT sector and the wages they can command, this article focuses on one particular way your organization might be able to save money on IT employees’ pay.

What’s the Exemption for Computer-Related Jobs?

Like many states, Wisconsin requires employers to pay nonexempt employees 1½ times their regular rate of pay for all hours they work in excess of 40 hours per week. However, there are exceptions to that general rule, and certain employees are exempt from overtime pay. Wisconsin’s computer-related occupations exemption allows companies to avoid paying overtime to certain classes of IT professionals. Under that part of the Wisconsin Administrative Code:

Any employee who is a computer systems analyst, computer programmer, software engineer, or other similarly skilled worker, who, in the case of an employee who is compensated on an hourly basis, is compensated at a rate of not less than $27.63 an hour, and whose primary duty is one of the following:

    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.
    4. A combination of the duties described in pars. (a), (b) and (c), the performance of which requires the same level of skills.

Note that Wisconsin’s computer professional exemption is intended to be interpreted in a manner consistent with the federal Fair Labor Standards Act (FLSA) and its related regulations.

What if IT Workers Are Independent Contractors?

Do you need to worry about the computer professional exemption if you use independent contractors rather than employees? The short answer is no. However, the first question you should ask yourself is whether you should be treating your software engineers as employees or independent contractors.

The independent contractor test is different depending on the law that applies. For example, an individual can be an independent contractor for purposes of one law, such as unemployment compensation law, but not for purposes of other laws, such as worker’s compensation law or wage and hour law. If you have employees who are doing the same type of work as your “independent contractors,” you should probably be treating the contractors as employees. There’s clearly less risk in simply deeming workers employees rather than independent contractors.

How Does the IT Exemption Work for Employees?

If your software engineers aren’t working more than 40 hours in a workweek, then the overtime question is probably irrelevant. However, it’s likely that software engineers will work more than 40 hours in a workweek. Because Wisconsin’s exemption must be interpreted in a manner consistent with the FLSA, the federal law and its regulations offer guidance for Wisconsin companies.

The first issue that determines whether employees qualify for the computer-related occupations exemption is the amount of their compensation. If they’re paid on a salary basis, software engineers must receive at least $455 per week. Alternatively, you can pay IT employees on an hourly basis, but they must be paid at least $27.63 per hour.

If the compensation threshold is satisfied, the next question is whether the employees’ primary duties meet the duties test. While job titles don’t determine exempt status, using a job title that corresponds with language in the regulations is helpful. To that end, the applicable state and federal regulations specifically note that “computer system analysts, computer programmers, software engineers and other similarly skilled workers in the computer field” fall within the scope of the exemption.

However, simply giving someone a particular title doesn’t necessarily make him exempt. A computer professional will satisfy the duties test if his primary duty is one 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;
  • The design, documentation, testing, creation, or modification of computer programs related to machine operating systems; or
  • A combination of the aforementioned duties, the performance of which requires the same level of skills.

The term “primary duty” refers to an employee’s “principal, main, major or most important duty.” When determining an employee’s primary duty, courts will examine all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole. Employees who spend more than 50 percent of their time performing exempt work will generally satisfy the primary duty requirement.

You should note that working with computers in general doesn’t necessarily mean an employee will qualify as exempt from overtime pay. For example, employees engaged in the manufacture or repair of computer hardware and related equipment don’t fall within the exemption.

Additionally, employees whose work is highly dependent on, or facilitated by, the use of computers and computer software programs (e.g., engineers, drafters, and others skilled in the use of 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 regulation, are not exempt computer professionals.

Employees with the following job duties generally will not qualify for the computer professional exemption:

  • Managing backup and archive libraries;
  • Inputting data;
  • Preparing operator instructions or computer operation performance diagrams;
  • Running, fixing, or debugging computers;
  • Staffing help desks; or
  • Installing, maintaining, and troubleshooting software on company computers.

Bottom Line

If you currently employ computer programmers, you may not have to pay them overtime if they qualify for an exemption under the pertinent state or federal regulations. Although there is scant case law on this topic in Wisconsin or from the federal district courts that cover Wisconsin, a court in Connecticut recently determined that an IT worker wasn’t considered exempt from overtime even though she spent at least half of her workday revamping her employer’s computer backup and recovery processes. The court concluded that the employee’s primary duty consisted of routine maintenance work, and rather than consulting with users to determine hardware, software, or system functional specifications, she consulted with users only to answer their technical questions.

The lesson is, before you decide not to pay an IT professional overtime, you should consider the totality of her job duties.

For more information about "Do We Have to Pay Our Computer Programmers Overtime?," contact Heath P. Straka at hstraka@axley.com or 608.283.6755.