Computer Services Personnel: Overtime Pay Under the Fair Labor Standards Act
Computer Services Personnel: Overtime Pay
Under the Fair Labor Standards Act
Updated February 7, 2005
William G. Whittaker
Specialist in Labor Economics
Domestic Social Policy Division
Computer Services Personnel:
Overtime Pay Under the Fair Labor Standards Act
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, among other things, 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 6½ 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
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
This paper explores treatment of computer professionals under the FLSA.
Most Recent Developments..........................................1
In troduction ......................................................1
General Definition of “Professional”...................................3
Various Tests and Standards.....................................3
Refining the Concept of “Professional”.............................4
Seeking Legislative Solutions........................................6
Congress Addresses the Issue....................................6
Regulations Issued by the Department of Labor......................8
Congress Restructures the Exemption, 1996.............................9
New Statutory Language........................................9
Declining Value of the Salary Test...............................10
Legislative Proposals During the 106th Congress........................11
Legislative Proposals During the 107th Congress........................13
Legislative Proposals During the 108th Congress........................13
New Legislation Proposed......................................13
New Section 13(a)(1) Regulations Proposed by DOL.................14
Comment and Policy Considerations..................................14
Computer Services Personnel: Overtime
Pay Under the Fair Labor Standards Act
Most Recent Developments
Under the Fair Labor Standards Act, not all workers are treated in precisely the
same manner in terms of wages and hours. Computer services personnel is a case in
point. Through a number of years, employers had sought to classify them at
professionals — and, thus, to exempt them from minimum wage and overtime pay
— but to no avail. Then, in 1990, Congress adopted special legislation directing the
Department of Labor to reassess its treatment of such workers. The Department did
so; but, in 1996, Congress created a new provision of the FLSA [Section 13(a)(l7)],
declaring such workers (under certain circumstances) to be as categorically exempt.
Although the 1996 amendments were adopted, it was suggested that some fine-
tuning continued to be needed. Various proposals dealing with computer services
legislation continued to be introduced through the 108th Congress. Although none
of the new proposals was adopted, the Administration proposed a more general
revision of the Section 13(a)(1) requirement, dealing with executives, administrators,
and professionals. As ultimately promulgated in the spring of 2004 (and given effect
in August of that year), the new provision would have made it somewhat easier for
computer services workers, with others, to qualify for exemption.
Whether the new regulation will be sufficient to deal with computer services
personnel or will need further congressional involvement remains somewhat unclear.
This report traces the manner in which one industry, computer services, has been
treated for wage and hour purposes under the Fair Labor Standards Act.
The Fair Labor Standards Act of 1938 (FLSA), as amended, is the basic federal
statute dealing with minimum wages, overtime pay, and related standards. Three
sections are of immediate relevance for this report. Section 6 is the act’s basic
minimum wage provision. Section 7 requires that one and one-half times one’s
regular rate of pay (“time-and-a-half”) be paid to workers for hours worked in excess
of 40 per week. Section 13 is devoted to exemptions. In Section 13(a)(1), Congress
exempted both from minimum wage and overtime pay protections “any employee
employed in a bona fide executive, administrative, [or] professional” capacity (the
EAP exemption), adding that such terms were to be “defined and delimited by
regulations of the Administrator” — that is, now, the Secretary of Labor.
Initially limited, largely, to industrial workers associated with interstate
commerce, wage/hour coverage under the FLSA has gradually been expanded to
include a larger portion of the workforce. Speaking generally, employers have urged
a broadening of exemptions while workers have urged expanded coverage. In some
cases, precise exemptions have been written into the act; at other times, exemption
has been flexible, leaving discretion to the Secretary of Labor. The result after 60
years, some have argued, is a statute that is inordinately complex and difficult to
interpret — though others would argue that it is necessarily precise.1
Under the Fair Labor Standards Act of 1938 (FLSA), special minimum wage
and overtime pay treatment (an exemption) was allowed for certain persons who
could qualify as bona fide executive, administrative or professional employees
[Section 13(a)(1)]. Definition of a bona fide executive, administrative or
professional employee was left to the discretion of the Secretary of Labor who,2
through the years, has developed qualifying criteria. To be exempt under Section
13(a)(1), two criteria must normally be met. First, the worker must be paid a salary
above a threshold established by the Secretary: the salary test. Second, the worker
must be engaged in duties that would meet, in this instance, the standard of a
professional (the duties test) as specified by the Secretary. In addition, the worker
would be required to devote not more than 20% of his or her time to duties that are3
not regarded as executive, administrative, or professional.
Definition of executive, administrative and professional and establishment of
the elements necessary to qualify as bona fide have proved contentious: in part
because persons so defined and, thus, falling within the Section 13(a)(1) exemption,
are stripped of minimum wage and overtime pay protection under the act. Further,
in rapidly evolving fields, it has not always been clear who actually is a bona fide
professional and who is simply a technically skilled worker. In computer sciences,
for example, job descriptions, academic requirements, and work patterns varied
widely and were, early, in near constant flux. Thus, the Department, after lengthy
consideration, determined that it was not practical to render a clear definition of
professional in the computer services field, delaying a finding till the discipline had
1 See, for example, Jeanne Saddler, and Albert Karr, “Minimum-Wage Exemptions Baffle
Many,” The Wall Street Journal, Mar 23, 1989, p. B2. Although it is now dated in some
places, the best overview of exemption patterns under the FLSA is “Volume IV of the
Report of the Minimum Wage Study Commission,” Exemptions from the Fair Labor
Standards Act (Washington: GPO, 1981), 492 p.
2 While there are different qualifying factors established by the Secretary for each
classification (executive, administrative, or professional), the computer services issue
revolved around the concept of professional.
3 The “time-duties” requirement was changed under the new Section 13(a)(1). But, prior to
the 2004 administrative changes in the act, it remained a significant factor.
In the absence of any change in the DOL position established in the mid-1960s,
Congress took action. In 1990, with P.L. 101-583, the 101st Congress directed the
Secretary to promulgate regulations that would permit certain computer services
workers to qualify as exempt under Section 13(a)(1). It specified certain job titles (or
sub-disciplines) that would be included in the exemption and set the wage level
necessary for such workers to qualify.4 DOL published rules implementing the
legislation in 1991; but, the matter was not entirely resolved.5 In 1996, with P.L.
104-188, Congress restructured the provision. It moved the exemption for computer
services personnel from Section 13(a)(1) — where it was predicated upon the
concept of bona fide executive, administrative or professional status (with qualifying
tests) — to a new Section 13(a)(17), a categorical exemption which rests upon
conditions specified by Congress. Thereafter, the extent to which computer industry
workers met DOL’s tests for professional status would be a moot issue.
In the 106th Congress, legislation was introduced that would have rewritten the
Section 13(a)(17) exemption to refine the types of computer-related work covered by
the exemption and to restructure the exemption. The proposals died at the close of
the 106th Congress, but the issue re-emerged in the 107th Congress. But, no new
legislation was adopted.
General Definition of “Professional”
The eligibility criteria developed by the Secretary for the EAP exemption are
precise. Bona fide professionals are to be paid at rates befitting their status as a
professional, and their work is to be substantively different from that of factory,
clerical, or other workers categorized as non-professional. The Department’s
regulatory structure is intended to assure that workers are not given a pro forma title
so that they can be paid a rate lower than that intended by Congress.
Various Tests and Standards
In Section 29, Part 541.3, of the Code of Federal Regulations (CFR), the duties
test and time duties test for a “professional” are set forth in detail. An “employee
employed in a bona fide ... professional capacity” is a worker:
4 No hearings were conducted on the measure. It was adopted by voice vote after relatively
modest debate. See Congressional Record (hereafter cited as CR), October 18, 1990, pp.
H10563-H10564, and October 27, 1990, p. S17679. The issue had been raised briefly
during consideration of the FLSA Amendments of 1989. See CR, April 12, 1989, pp.
S3741-S3742; May 17, 1989, p. S5477; and November 1, 1989, p. H7855. The enactment
seems to have sparked a mixed reaction within the industry. See New York Times, January
28, 1991, p. D3; Washington Post, January 25, 1991, pp. F1-F4; and Bureau of National
Affairs, Daily Labor Report (hereafter cited as DLR), May 13, 1991, p. A1.
5 Federal Register, February 27, 1991, pp. 8250-8251. The rules took effect on March 29,
(a) Whose primary duty consists of the performance of:
(1) Work requiring knowledge of an advance[d] type in a field of science or
learning customarily acquired by a prolonged course of specialized intellectual
instruction and study, as distinguished from a general academic education and
from an apprenticeship, and from training in the performance of routine mental,
manual, or physical processes [italics added], or
(2) Work that is original and creative in character in a recognized field of artistic
endeavor (as opposed to work which can be produced by a person endowed with
general manual or intellectual ability and training), and the result of which
depends primarily on the invention, imagination, or talent of the employee, or
(3) Teaching, tutoring, instructing, or lecturing in the activity of imparting
knowledge and who is employed and engaged in this activity as a teacher in the
school system or educational establishment or institution by which he is
(b) Whose work requires the consistent exercise of discretion and judgment in
its performance; and
(c) Whose work is predominantly intellectual and varied in character (as opposed
to routine mental, manual, mechanical, or physical work) and is of such character
that the output produced or the result accomplished cannot be standardized in
relation to a given period of time; and
(d) Who does not devote more than 20 percent of his hours worked in the
workweek to activities which are not an essential part of and necessarily incident6
to the work described in paragraphs (a) through (c) of this section; ...
In addition, there are qualifying earnings tests which, normally, would be updated
periodically through the rulemaking process. However, the current salary tests have
remained in place since established on an interim basis in 1975. By the mid-1990s,
DOL estimated that slightly in excess of 30 million employed wage and salary
workers were minimum wage/overtime pay exempt under Section 13(a)(1) in the
three categories of executive, administrative, or professional.7
Refining the Concept of “Professional”
DOL has been precise in setting standards for professionals exempt under
Section 13(a)(1). Over time, it has applied the definition within specific work
situations through opinion letters issued by the Wage and Hour Division; but, until
the legislation of the 1990s, its treatment of computer services personnel was rooted
in 1960s experience.
Responding to a request that certain computer services workers be designated
as professionals, the Wage-Hour Administrator (spring 1966) stressed “discretion and
6 See 29 CFR. 541.3(a) forward. These standards applied with respect to computer services
workers for whom a Section 13(a)(1) professional exemption was sought prior to enactment
of P.L. 101-583 in 1990. With the new Section 13(a)(1) regulations, implemented in August
7 U.S. Department of Labor, Employment Standards Administration, Minimum Wage and
Overtime Hours Under the Fair Labor Standards Act, 1998 Report to the Congress
(Washington: GPO, June 1998), Table C1a95. Calculated on an hourly basis, the qualifying
wage would range from $4.25 per hour to $6.25 per hour. See also Federal Register,
February 19, 1975, pp. 7091-7094.
independent judgment.”8 Even were a portion of a worker’s time devoted to
activities that were within the concept of “professional,” there would still remain the
duties time test to be satisfied: namely, that a major portion of his or her work must
be professional in character.
An inquiry of a year later drew a similar reply. DOL affirmed that while a
computer operator’s work was “highly technical and mechanical” and “based on
skill,” it did not require advanced learning of a scholarly character. It is “reasonably
clear that he is not performing work involving the regular and continuing use of
knowledge of an advanced type in a field of science or learning customarily acquired
by a prolonged course of specialized intellectual instruction and study ....”9
By the early 1970s, computer technology was rapidly developing as a
specialized discipline; and, in that context, DOL commenced a reevaluation of its
treatment of workers in the data processing field. These employees, the Department
noted, “are identified by a multitude of titles, including program operator,
programmer, systems analyst, and many others. They have varied experience and
training, and perform a variety of tasks which are difficult to measure in terms of
their significance and importance to management.”10
Reviewing its application of the Section 13(a)(1) exemption in the computer
technology field, DOL solicited outside input with diverse results. Employer
representatives “contended that computer programmers and systems analysts should
be considered professional employees” and, thus, be minimum wage and overtime
pay exempt. Some urged that a “junior programmer” should also be exempt.
Employee spokespersons, pointed out that data processing was still a “relatively new
occupational area,” still “in a state of flux,” and that “job titles and duties are not
regularized and overlap and intermix in a confusing manner.” They contended “that
to expand the exemption was an invitation for employers to work such employees
longer hours with no additional compensation.” Both employers and employees
concurred that a college degree was not “a requirement for entry into the data
Ultimately, the Department concluded that “there is no need to change the
definition of professional employee” in the regulations as it would affect computer
services personnel. Instead, it would authorize exemptions based upon specific
circumstances and work situations.12
8 Opinion letter, signed by Clarence T. Lundquist, United States Wage-Hour Administrator,
April 14, 1966.
9 Ibid., May 22, 1967.
10 Federal Register, September 10, 1970, pp. 14268-14269.
11 Federal Register, December 2, 1971, pp. 22976-22979.
Through the early 1970s, DOL maintained its ad hoc approach,13 emphasizing
that the professional exemption under Section 13(a)(1) required knowledge “of an
‘advanced type’ which is customarily acquired by a prolonged course of specialized
intellectual instruction and study.”14 It maintained that a bachelor’s degree was a
standard prerequisite for a professional, defining its concept of “a prolonged course
of specialized instruction and study” as “four academic years of preprofessional and
professional study in an accredited university or college.”15 It affirmed that it could
not “give a blanket determination as to the exempt status of any group or class of
employees since the problem is a factual one dependent upon the particular situation
with respect to each individual employee.”16 It viewed itself as “constrained by
judicial decisions to interpret exemptions from the act’s provisions narrowly [and]
... limited to those who come plainly and unmistakably within their terms and
Various Departmental initiatives for revision of the regulations governing
Section 13(a)(1) would be considered during the Ford and Carter Administrations.
With the advent of the Reagan Administration, general reform would be suspended;
the Department would continue to follow its policies of the 1960s and 1970s.
Seeking Legislative Solutions
When the Department of Labor did not adopt regulations more broadly
exempting computer services personnel, Congress took up the issue. There has now
been more than a decade of legislative activity in this area.
Congress Addresses the Issue
In the 101st Congress (1989-1990), Senator David Durenberger, with others,
proposed an amendment to general FLSA legislation that directed the Secretary of
Labor to interpret the wage/hour “professional exemption” of Section 13(a)(1) in a
manner “that permits computer systems analysts, software engineers, and other
similarly skilled professional workers to qualify ... for such exemption.” Under the
Durenberger amendment, the exemption would seem to have applied to salaried
workers and to hourly paid workers if their hourly wage was “at least 6½ times
13 Federal Register, May 7, 1973, pp. 11390 and 11404.
14 Opinion letter, signed by Warren D. Landis, Acting Wage-Hour Administrator, June 9,
15 Opinion letter, signed by Warren D. Landis, Deputy Wage-Hour Administrator, March
16 Opinion letter, signed by Warren D. Landis, Acting Wage-Hour Administrator, November
17 Opinion letter, signed by Warren D. Landis, Deputy Wage-Hour Administrator, March
5, 1976. It has been the tradition of the Department to view exemptions narrowly. As
Landis stated here: “This is so because an application of an exemption deprives an
employee of the monetary benefits which the Act otherwise provides.”
greater than the applicable minimum wage” under the FLSA.18 No hearings had been
conducted with respect to the issue. The amendment, offered on the floor, was
adopted in the Senate without a roll call vote.19 However, the legislation was vetoed
by President Bush. An attempt by the House to override the President’s veto failed.20
Subsequently, a revised version of the FLSA/minimum wage legislation was adopted
and signed by the President late in 1989; but, in the process, the computer services
exemption had been dropped.21
During the summer of 1990, legislation had been adopted in the Senate to deal
with FLSA wage rates for American Samoa. When it was called up in the House, an
amendment was offered by Representative Austin Murphy, reintroducing the
computer services issue.22 On a voice vote, the House adopted the consolidated bill.23
The Senate concurred in the House (Murphy) amendment, again by voice vote,24 and
on November 15, 1990, the measure was signed by President Bush (P.L. 101-583).
As it related to the computer industry, P.L. 101-583 provided, in part, for the
Not later than 90 days after the date of enactment of this Act, the Secretary of
Labor shall promulgate regulations that permit computer systems analysts,
computer programmers, software engineers, and other similarly skilled
professional workers as defined in such regulations to qualify as exempt
executive, administrative, or professional employees under section 13(a)(1) ...
Such regulations shall provide that if such employees are paid on an hourly basis
they shall be exempt only if their hourly rate of pay is at least 6½ times greater
than the applicable minimum wage ...
Thus, Congress took three steps. First. It mandated development of regulations that
would “permit” the designated computer services personnel to be exempt from FLSA
wage/hour requirements under Section 13(a)(1) if the requisite salary test were met:
as bona fide “executive, administrative, or professional”employees. But, it did so
without amending Section 13(a)(1) directly. Second. It mandated that DOL, within
90 days following enactment, promulgate the Section 13(a)(1) regulations applicable
to the computer industry. Third. It established, by statute, the qualifying salary test
for a Section 13(a)(1) exemption for the computer industry. It did not direct that the
Secretary regard the computer services salary test as a guide for other industries; but,
it did provide a precedent that the Department could hardly have missed.
18 CR, April 12, 1989, p. S3741.
19 Ibid., pp. S3741-S3742.
20 The Durenberger language does not appear to have been a factor in the veto decision.
21 CR (permanent set), November 1, 1989, p. 26805.
22 CR, October 18, 1990, p. H10563.
23 Ibid., p. H10565.
24 CR, October 27, 1990, p. S17679.
Regulations Issued by the Department of Labor
Responding to its mandate, DOL issued an interim final rule on February 22,
1991. It noted that there had been”[i]nsufficient time” allowed “for the Department
to issue a proposal for comments, review the comments, and promulgate a final rule
to be effective 90 days after the law was enacted.” But, it invited a submission of
comments through a 60-day period preliminary to publication of a final rule. Since
no hearings had been conducted on the issue and the legislative history was sparse,
DOL may have been uncertain about the precise intent of Congress.25
The final rule made a number of technical and definitional changes in 29 CFR
it amended the definition of professional (541.3(a)) by adding the following:
(4) Work that requires theoretical and practical application of highly-specialized
knowledge in computer systems analysis, programming, and software
engineering, and who is employed and engaged in these activities as a computer
systems analyst, computer programmer, software engineer, or other similarly
skilled worker in the computer software field, as provided in 541.303; and ...
In 541.303, it presented an inventory of job titles indicative that an overtime pay
exemption might be in order, other criteria having been met, but added: “... because
of the wide variety of job titles applied to computer systems analysis and
programming work, job titles alone are not determinative of the applicability of this
exemption.” In 541.3(b), DOL stated that consideration for an exemption would also
rest upon “an employee’s primary duty” — that is, one or more of the following:
(1) The application of systems analysis techniques and procedures, including
consulting with users, to determine hardware, software, or system functional
(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, or modification of computer programs
related to machine operating systems, or
(4) A combination of the aforementioned duties, the performance of which
requires the same level of skills.
It explained that “employees engaged in the operation of computers or in the
manufacture, repair, or maintenance of computer hardware and related equipment,”
as with persons whose work is “highly dependent upon, or facilitated by, the use of
computers and computer software programs,” would not be included as eligible for
the overtime pay exemption.26
At least since the 1970s, the Department had argued that the concept of
professional for Section 13(a)(1) purposes involved, as a prerequisite, a substantial
25 Federal Register, February 27, 1991, p. 8250-8251.
26 See 29 CFR 541, paragraphs as indicated in the text.
academic education. Here, in response to P.L. 101-583, DOL modified its stance.
In 541.303(c), the final rule stated with respect to computer professionals:
(c) The exemption ... applies only to highly-skilled employees who have
achieved a level of proficiency in the theoretical and practical application of a
body of highly-specialized knowledge in computer systems analysis,
programming, and software engineering, and does not include trainees or
employees in entry level positions learning to become proficient in such areas or
to employees in these computer-related occupations who have not attained a level
of skill and expertise which allows them to work independently and generally
without close supervision. The level of expertise and skill required to qualify for
this exemption is generally attained through combinations of education and
experience in the field.
However, DOL added: “While such employees commonly have a bachelor’s or
higher degree, no particular academic degree is required for this exemption, nor
licensure or certification, as is required for the exemption for the learned
professions.” Of course, employees who may not qualify for exemption as a
professional could potentially qualify under another component of Section 13(a)(1)
because of their managerial and administrative duties.
Congress Restructures the Exemption, 1996
Under P.L. 101-583, Congress directed DOL to promulgate new regulations
concerning the Section 13(a)(1) computer services exemption. The result had been
regulatory, not statutory — except with respect to the earnings threshold. Five years
later, Congress would adopt a different approach.
During the 104th Congress (1995-1996), several hearings were conducted on the
concept of the minimum wage but not upon specific legislation. None of them
focused upon the computer personnel exemption — nor was that a major issue during
consideration of the proposal. In August 1996, new FLSA legislation was adopted
and signed by President Clinton (P.L. 104-188).
New Statutory Language
Under the 1996 FLSA amendments, a new categorical exemption was created
as Section 13(a)(17). Congress, thus, by-passed entirely the sub-paragraph Section
13(a)(1) reference to “executive, administrative, or professional.” In doing so, it
first decreed that certain computer services personnel would be exempt from the
minimum wage and overtime pay protections of the FLSA and, second, specified the
conditions that would permit that exemption to have effect. The new statutory
(17) any employee who is a computer systems analyst, computer programmer,
software engineer, or other similarly skilled worker, whose primary duty is —
(A) the application of systems analysis techniques and procedures, including
consulting with users, to determine hardware, software, or system functional
(B) 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;
(C) the design, documentation, testing, creation, or modification of computer
programs related to machine operating systems; or
(D) a combination of duties described in subparagraphs (A), (B), or (C) the
performance of which requires the same level of skills, and
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.
In effect, Congress took discretionary initiative away from DOL, in the case of
computer services personnel, and acted directly. With the targeted workers
positioned under Section (13)(a)(17), there was no longer any need for the Wage and
Hour Division to define “bona fide” or “professional.” The exemption was now27
categorical with a statutory salary test for workers “compensated on a hourly basis.”
Declining Value of the Salary Test
In a floor statement explaining the earnings test incorporated within Section
13(a)(17), Representative William Goodling affirmed his understanding that it was
“merely restating the law indicating that if they are making 6.5 times the minimum
wage,” the targeted computer services workers would not qualify for overtime pay
under the FLSA. “The amendment simply maintains the current exemption level for28
stated the view that “The amendment freezes the rate at which certain computer
professionals are exempt from the minimum wage at $27.63 per hour. The current
exemption amount is at 6.5 times the minimum wage ....” If the threshold (“6½
times”) “was allowed to float with the minimum wage,” Representative Gunderson
observed, the dollar volume threshold would continue to increase. Under P.L. 104-
188 it wouldn’t do so; but, he explained, the FLSA “was intended to protect those
who were underpaid, not highly paid professionals.”29
Under P.L. 104-188 (the 1996 amendments), the threshold was, indeed, 6½
times the minimum wage at the time the new amendments were adopted ($4.25 x 6½
= $27.63). However, P.L. 104-188 also raised the minimum wage to $5.15 per hour.
Because the $27.63 figure was now frozen in the statute, the “6½ times” formula was
reduced. Had the threshold been allowed to float (i.e., 6½ times the new minimum
wage), the new earnings test would have been $33.48 per hour. As a result of
moving from a floating threshold to a fixed (frozen) figure, the new ratio became 5.430
times the minimum wage.
27 How the specific job descriptions within the new exemption would be defined, the
percentage of time spent in covered work, etc., was still, presumably, left to the Secretary
to determine. Italics added.
28 CR, May 23, 1996, p. 12309.
29 Ibid., p. 12278.
30 If the minimum wage is increased to $6.15 per hour as has been proposed in legislation
of the 106th Congress and if the $27.63 figure is not altered, then the ratio will be 4.5 times
Legislative Proposals During the 106th Congress
In 1989, the issue of a wage/hour exemption for certain computer services
personnel quietly emerged as a legislative issue, with a change in the statute being
approved in 1990. In 1996, Congress revisited the issue and altered the structure of
wage/hour regulation for computer services workers. But, the industry continues to
be marked by evolution both of systems and work patterns. Thus, the statutory
language of 1990 and 1996 may be perceived as needing further alteration.
In the 106th Congress, Representative Robert Andrews, with others, introduced
legislation (H.R. 3038) that would have rewritten Section 13(a)(17). The bill had
basically three provisions. First. The proposal, in effect, would have repealed the
existing Section 13(A)(17) and would then have started over. Second. Although its
language generally paralleled that of the existing code, H.R. 3038 would have
redefined and broadened the types of computer-related work that could qualify one
as overtime pay and minimum wage exempt under a reconstructed paragraph (17) —
basically keeping abreast of a developing and rapidly changing field. It read:
(17) any employee who is a computer systems, network, or database analyst,
designer, developer, programmer, software engineer, or other similarly skilled
(A) whose primary duty is —
(i) the application of systems or network or database analysis
techniques and procedures, including consulting with users, to
determine hardware, software, systems, network, or database
specifications (including functional specifications);
(ii) the design, configuration, development, integration,
documentation, analysis, creation, testing, securing, or modification
of, or problem resolution for, computer systems, networks, databases,
or programs, including prototypes, based on and related to user,
system, network, or database specifications, including design
specifications and machine operating systems;
(iii) the management or training of employees performing duties
described in clause (i) or (ii); or
(iv) a combination of duties described in clauses (i), (ii), or (iii) the
performance of which requires the same level of skills; and ...
The term “network” was intended to include “the Internet and intranet networks and
the world wide web.” Third. H.R. 3038 would have set the earnings test for the
exemption at $27.63 per hour as in the 1996 amendments.31
the minimum wage.
31 H.R. 3038 did not directly specify a dollar amount. Rather, it provided
Introduced on October 7, 1999, H.R. 3038 was referred to the Committee on
Education and the Workforce. No further action on the Andrews bill occurred during
the 106th Congress.
As the 106th Congress advanced, momentum developed for enactment of new
minimum wage legislation. H.R. 3081, introduced by Representative Rick Lazio,
with others, called for an increase in the minimum wage to $6.15 per hour. Further,
it would have altered wage/hour coverage for certain sales personnel, and would have
exempted persons employed as a “licensed funeral director or licensed embalmer”
from wage/hour coverage under the FLSA. In language largely identical to H.R.
3038 (Andrews), the Lazio bill would have redefined wage/hour treatment of certain
computer services personnel, similarly setting the earnings test at “not less than
$27.63 an hour” but stating that amount, directly, in monetary terms.32
While the Lazio bill would have increased the minimum wage to $6.15 per hour,
it made no change in the threshold of earnings that would permit minimum wage and
overtime pay exemption. Thus, it altered the ratio of the threshold to the minimum
wage — establishing a new threshold formula, by indirection, at the equivalent of 4½
times the minimum wage.
H.R. 3081 was referred to the Committee on Ways and Means and to the
Committee on Education and the Workforce for consideration of the provisions
falling under the jurisdiction of the two committees. On November 9, 1999, the tax
provisions of the measure were marked-up in Ways and Means which reported the
bill on November 11 (H.Rept. 106-467, Part I). The Committee on Education and
the Workforce did not act immediately. On January 28, 2000, the Committee on
Education and the Workforce was discharged from further consideration of the
legislation: no hearings were held and no report was filed.
On March 9, 2000, H.R. 3081 was passed by the House of Representatives. The
Senate had earlier adopted different and separate minimum wage language: an
amendment to S. 625, the Bankruptcy Reform Act of 1999 — but the latter did not
deal with the exemption for computer services personnel. Ultimately, as the 106th
Congress drew to a close, the computer services legislation was laid aside, and it died
as the Congress adjourned.
(B) who, in the case of an employee who is compensated on an hourly basis, is
compensated at the rate set by the amendment enacting this paragraph made by
section 2105(a) of the Employee Commuting Flexibility Act of 1996.
This, of course, is the language freezing the threshold at $27.63 and abandoning the original
formula of “6½ times” the statutory minimum wage under Section 6.
32 The labor-related provisions constitute a relatively small proportion of H.R. 3081, the bulk
of the package dealing with issues not related to the FLSA or labor standards.
Legislative Proposals During the 107th Congress
On February 8, 2001, Representative Quinn introduced H.R. 546, an umbrella
proposal dealing mostly with non-labor issues. Added at the end, however, were
provisions to raise the minimum wage to $6.15 an hour after April 1, 2002, and,
among other changes in the FLSA, to broaden the wage/hour exemption with respect
to computer services personnel. The computer services personnel provisions were
later introduced as a free-standing bill by Representative Andrews: H.R. 1545. Theth
bills were essentially identical and similar to the proposals of the 106 Congress. The
same pattern of referral was followed: H.R. 1545 to Education and the Workforce;
H.R. 546 to Ways and Means and to Education and the Workforce.
Various other FLSA-related proposals were introduced during the 107th
Congress, some as part of composite legislation and others free standing.33 The
primary focus, however, appeared to be upon an increase in the minimum wage —
which, in turn, some argued, would need to be linked to tax benefits for business.
While hearings were conducted on certain of the FLSA-related bills, the computer
services personnel legislation did not receive immediate attention. Neither bill wasth
acted upon during the 107 Congress.
Legislative Proposals During the 108th Congress
The treatment of computer services workers under the FLSA was the subject of
new legislative initiatives during the 108th Congress, given impetus by a regulatory
change initiated by DOL.
New Legislation Proposed
On March 3, 2003, Senator Graham of South Carolina introduced S. 495, a
proposal that would amend Section 13(a)(17) of the FLSA to redefine the treatment
of certain computer services workers with respect to minimum wage and overtime
coverage. A companion bill (H.R. 1996) was introduced by Representative Joe
Wilson, also of South Carolina, on May 6, 2003. The bills list certain types of
computer services workers who could be minimum wage and overtime pay exempt
(“any employee who is a computer systems, network, or database analyst, designer,
developer, programmer, software engineer or other similarly skilled worker”) and
provide an inventory of duties that such exempt workers could be expected to
The bills were referred, respectively, to the Committee on Health, Education,
Labor, and Pensions and to the Committee on Education and the Workforce, but did
not advance beyond their referral.
33 See CRS Report RL30993, The Fair Labor Standards Act: Wage/Hour and Related
Issues Before the 107th Congress, by William G. Whittaker.
New Section 13(a)(1) Regulations Proposed by DOL
On March 31, 2003, DOL proposed a general restructuring of the regulations
implementing the minimum wage and overtime pay treatment of certain bona fide
professional (or executive and administrative) employees under Section 13(a)(1).
The proposed rule (29 C.F.R. Part 541) was contentious and provoked several
legislative initiatives designed to block its issuance in final form and/or
implementation.34 None of these alternative measures was adopted and, in late
August 2004, the new regulation took effect.
The new rule provided several new elements. First. To qualify for exemption
(i.e., to be exempt from minimum wage and overtime pay), a worker would need to
earn at least $23,600 per month.35 Second. For any worker earning in excess of
$100,000 a year, there would be a presumed exemption (so long as he or she was
engaged in any single executive, administrative, or professional duty).
Thus, two standards were established for computer services workers: Section
13(a)(1), a new standard which could include anybody earning at least $23,660 a year
(with duties that were considered appropriate); with a second standard, Section
13(a)(17), a categorical exemption as a computer services workers who were paid at
least $27.63 — roughly $57,470 a year.36
How these two options would mesh is not entirely clear. Nor, is it clear how
one might distinguish a Section 13(a)(1) exempt worker at $23,660 a year from a
Section 13(a)(17) exempt worker at $57,470. Given these options, arguably few
employers would seek exemption from minimum wage and overtime pay standards
under Section 13(a)(17) when they could easily (and more economically) comply
with the standard potentially offered by Section 13(a)(1) under the Department’s new
regulation. Of course, an employer could still classify his or her employee as an
executive or administrator under the Section 13(a)(1) exemption, as the case may be,
and secure exemption.
Comment and Policy Considerations
Wage/hour treatment of computer services personnel has been intermittently an
issue before the Department of Labor and the Congress through the past 25 years.
Although it does not appear to have attracted great attention, it has raised a number
of considerations of policy. These focus both upon specific legislation and upon the
broader implications of the issue.
34 See CRS Report RL32088, The Fair Labor Standards Act: A Historical Sketch of the
Overtime Pay Requirements of Section 13(a)(1), by William G. Whittaker.
35 Since few workers, presumably, would have qualified for exemption as bona fide
executives, administrators, or professionals, they would likely have been covered under the
FLSA even without the new minimum standard.
36 See Federal Register, April 23, 2004, p. 22122 ff.
Whether and/or how to exempt certain computer services personnel from the
minimum wage and overtime pay protections of the FLSA reflects continuing change
in the field. Some may argue that the rationale for such action (exemption) is not
entirely clear. Further, who are the workers who would actually be affected by this
exemption? How many of them are there? In which sub-categories of computer
services personnel are they most numerous? And, who are those other similarly
skilled workers? What types of employers (firms) are/would be affected by the
exemption? Precisely, how would the changes proposed in the 108th Congress affect
the earnings and work patterns of specific computer services workers?
Prior to 1990, the Department of Labor encountered difficulties in determining
the “professional” status of categories of computer services workers. To surmount
that hurdle, the legislation of 1990 mandated that the regulations governing
wage/hour treatment of such workers under the FLSA be written in a manner that
would allow these workers more easily to be classified as exempt. With the 1996
amendments, Congress stepped directly into the process and created a new
categorical exemption [Section 13(a)(17)] under which certain computer services
workers, meeting a specified earnings threshold and duties test, could be classified
as exempt from FLSA overtime pay and minimum wage protection. Subsequent
legislative proposals have been directed at redefining the Section 13(a)(17)
In the case of Section 13(a)(17), Congress acted directly to exempt the computer
workers, setting specific exemption criteria. There was no further concern, under that
exemption, with the concept of professional, because the targeted workers (paid on
an hourly basis) would be categorically exempt by statute. With the changes
projected under Section 13(a)(1), that exemption may have been significantly
broadened through the rulemaking process. In the latter case, the targeted workers
(salaried) would need to meet a professional test — but that test could be different
from that set statutorily by Congress under Section 13(a)(17).
This could raise a number of questions. First. How will Section 13(a)(1) and
Section 13(a)(17) mesh? Second. In defining exemptions in the executive,
administrative and professional category, some may query whether it is more useful
for Congress to act directly (as in 1990 and 1996) or, rather, to offer general guidance
to DOL and then allow that agency to proceed administratively? Third. If Congress
does continue to act in areas where professional standards and skill requirements are
rapidly changing, will it find itself drawn, inevitably, year after year, into revisiting
these issues? Would on-going direct congressional involvement be useful
(continuing oversight) or be tedious and possibly lend itself to neglect? Fourth.
How much discretion ought properly to be left to the Department in matters that have
a broad impact with respect to the wages and hours of America’s workers and the
personnel policies of their employers? Fifth. If the Department does not act in a
timely fashion to define and delimit the pattern of exemptions under the FLSA (as in
the case of Section 13(a)(1) where it has that authority), will Congress necessarily be
drawn into the process?