Since 2004 the Computer Professional exemption has been a separate exemption from the “old school” FLSA exemptions of Executive, Professional (Learned and Creative), Administrative and Outside Sales. Previous to 2004, the Computer Professional exemption sat within the Learned Professional exemption if an employer’s position met the salary level, salary basis and duties test of that exemption. The FLSA Employee Exemption Handbook notes that the “classification of various computer related jobs under the Fair Labor Standards Act (FLSA) has long been a vexing problem for employers.”
Before 2004, even many IT positions that required an advanced degree did not easily meet the duties test. So the FLSA updated the duties test as well as the minimum hourly wage to qualify for the Computer Professional exemption. The new minimum hourly pay rate was $27.63. Any Computer Professional or “other similarly skilled worker” who does computer system analysis, computer programming, or software may qualify for this exemption if they meet the minimum hourly rate and the duties test.
The Eleventh Circuit Court of Appeals, in a case of first impression (Pioch v. Ibex Engineering Services, Inc. No.15-10845. 6/14/2016), was asked to rule on a situation that touched on two Computer Professional exemption criteria:
1. If an employer takes a pay deduction from an hourly exempt employee, does that forfeit the exemption?
2. Even though the position was paid hourly, its annual salary was well over the “highly compensated” exemption of $100,000/yr. Does a deduction from pay for purposes of recovering “mistaken” pay forfeit the exemption?
In this case the Defendant employed a software/hardware engineer for over 10 years. The last year of employment he was paid $85.50/hr. The company classified his position as exempt under the Computer Professional exemption. Not only was he paid over $27.63/hr., his position met the duties test as well. His work hours were varied, and he often worked over 40 hours in a week. He did not receive overtime pay at time and one-half. During this time he was also paid a per diem for working over 50 miles from home. His original address qualified him for the per diem, but two years into his ten-year tenure he moved much closer to work. Due to a “mistake” he never changed his address and the per diem continued to be paid until an audit discovered the error. By then the employer’s per diem payments to him amounted to $147,230. Perhaps knowing what was to come, or maybe not wanting to deal with the issue, the employee resigned. The employer withheld the employee’s last three weeks of pay in a feeble attempt to recover some of the improper payments.
The employee sued to get his last three weeks of pay alleging a violation of minimum wage and overtime provisions. The employer argued that the employee was exempt from coverage, per the FLSA (Sec. 213(1) (17)), as an hourly Computer Professional. Therefore, he was not entitled to overtime. Though the company withheld pay, paying back the three weeks would amount to unjust enrichment. The lower court agreed in part. It agreed the position was exempt from minimum wage, and therefore the employer did not lose the exemption because of the deduction from pay. However, it denied any unjust enrichment based upon an FLSA technicality–the per diem payments amounted to wages, which were not recoverable in an FLSA suit.
On appeal, the 11th Circuit Court held that the employer’s deduction for unjust payments did not change the employee’s exempt status. The Court did not lose sight of the fact that hourly payment method aside, this positon was paid well above most non-exempt employees and met the “highly paid exemption” threshold and then some. The Court, using a 2012 Supreme Court decision (Christopher v. SmithKline Beechum Corp.), noted that this employee’s pay well exceeded the Computer Professional hourly rate test, which was set higher than the salary basis test ($455/week at the time). This “over” compensation allowed for the potential overtime that comes with such positions.
The Appeals Court also took issue with the lower court’s rejection of the employer’s unjust enrichment claim. The lower court found that because the employee was covered by the FLSA, the employer could not treat the per diem as anything but wages. The Appeals Court said that because the position was legitimately exempt, the FLSA pay rules do not apply. The employer’s claim for this money and its subsequent deduction from the employee’s last pay, is based upon a state-law unjust enrichment claim, which can stand outside of an FLSA claim.
The lower court was given instructions to either “decline to exercise supplemental jurisdiction over the state unjust enrichment counterclaim or to decide in the first instance whether the employer’s attempt to recover per diem payments was unequivocally a claim to recover wage–which would now be time barred under Florida law.”
Sources: CCH HR AnswersNow. Withheld pay doesn’t surrender hourly computer employee’s overtime exemption; FLSA Employee Exemption Handbook ¶610 Computer Employees Tab 600 Page 23.