August 13, 2020

How Do You Qualify for the Computer Employee, Outside Sales Employee, or Highly-Compensated Worker Exemption?

16 minutes

[youtube https://www.youtube.com/watch?v=s2c6Zy4kgM8]

In Part 3 of our series on understanding FLSA exemptions, we went over the qualifications for the professional employee exemption. In Part 4, we will cover the computer employee, outside sales employee, and highly-compensated worker exemption.

To qualify for the computer employee exemption, the following tests must be met:

The employee must be compensated either on a salary or fee basis at a rate not less than $684 per week (as of 2020) or, if compensated on an hourly basis, at a rate not less than $27.63 an hour.

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

The employee’s primary duty must consist of:

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 the user or system design specifications.

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

A combination of the aforementioned duties, the performance of which requires the same level of skills.

Note that this exemption only applies to employees who are primarily engaged in computer systems analysis and programming or other similarly skilled computer-related occupations. It does not apply to employees engaged in the manufacture or repair of computer hardware and related equipment. These are employees whose work is highly dependent upon, or facilitated by, the use of computers and computer software programs, such as engineers, drafters, and others skilled in computer-aided design software.

To qualify for the outside sales employee exemption, all of the following tests must be met:

The employee’s primary duty must be making sales or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer.

The employee must be customarily and regularly engaged away from the employer’s place or places of business.

Highly compensated employees performing office or nonmanual work and paid total annual compensation of $100,000 or more (which must include at least $684 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative, or professional employee identified in the standard tests for exemption.

The regulations contain a special rule for “highly-compensated” workers who are paid total annual compensation of $100,000 or more. A highly compensated employee is deemed exempt under § 13(a)(1) if:

The employee earns total annual compensation of $100,000 or more, which includes at least $684 per week paid on a salary basis.

The employee’s primary duty includes performing office or nonmanual work.

The employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative, or professional employee.

Thus, for example, an employee may qualify as an exempt highly-compensated executive if the employee customarily and regularly directs the work of two or more other employees, even though the employee does not meet all of the other requirements in the standard test for exemption as an executive.

In Part 5, we will do a recap of the eight categories under which employees may qualify as exempt.

...more

View all episodes

By Rhamy Alejeal

1111 ratings