The Help Desk Overtime Bomb Is Ticking
IT managers who don't think that their help desk employees qualify for overtime pay might be very wrong -- and that can cost companies money.
It's a Wednesday in December 2007. PC Technical Analyst John Paul Myszczenko, sitting in a sixth-floor conference room at the headquarters building of an insurance company, is gazing out the window. Below, the Connecticut River winds its way through Hartford, Conn., to Long Island Sound. In a few minutes, the company's help desk team will assemble in the conference room for its weekly meeting. The view of the river is frequently more noteworthy than the meeting, but today will be an exception: This is a "mandatory meeting," so it portends big news. About 10 help desk agents and managers gather around the conference table.
Several others in remote offices join by teleconference. This insurance company, owned by American International Group Inc. -- the now-infamous AIG -- has just opened an office in Korea, and long-dreaded after-hours work duties are about to become a reality. Technicians, whose names were pulled from a hat, are assigned various weekdays, weekends and holidays to carry a pager after hours and monitor the Korean operation. The problem is that there is no compensation plan for this after-hours work.
Myszczenko has traveled this road before. When he started with the company two years earlier, there had been a proposal to provide 24-hour pager support for the executive floor. He had checked the Fair Labor Standards Act (FLSA) and concluded that such support involved overtime pay. Ultimately, the issue died when it was determined that there would not be enough calls to justify the support effort. But before the issue died, Myszczenko brought his concerns to the attention of his supervisor, who in turn passed them on to human resources. Myszczenko said the response from HR was, "Overtime does not apply to the help desk."
Wrong answer. The truth is that overtime does apply to the help desk. Thousands of companies around the country believe that overtime does not apply to their salaried help desk personnel, but that position is challenged daily by the Wage and Hour Division of the U.S. Department of Labor (DOL). This is the same DOL that recovered $163 million dollars in overtime back-wages last year and assessed $3.9 million in civil penalties for overtime violations (see "Am I Eligible for Overtime?").
|Exemptions by the Duties|
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 $455 per week 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 worker in the computer field performing the primary duties described below:
- 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.
Source: Code of Federal Regulations pertaining to ESA (CFR), Title 29, Chapter V, Part 541, Subpart E.
Even though he clearly understood that management believed overtime pay did not apply to the help desk, Myszczenko was fuming as he walked out of the Korea meeting with a schedule in his hand that included weeks of unpaid after-hours support. He was motivated to call the DOL to find out for himself whether overtime applied.
The DOL agent asked Myszczenko some questions about the nature of his job. Myszczenko discovered that he fell into a category called "IT support specialist," which is often mistakenly classified as exempt from overtime. He learned that the government defines the workweek as 40 hours-so all hours worked beyond 40 hours per week should be paid at time and a half.
Myszczenko wondered how much overtime he had already worked. The company had a PeopleSoft time-tracking system where help desk technicians recorded their hours. He learned that he had earned some $17,000 in overtime over the previous two years.
Although the insurance company tracked work hours, other companies don't when their employees are classified as exempt. When the DOL investigates, in the absence of employer records, the department accepts whatever estimates of overtime the employee guesstimates. Shawn Lillie, an employment attorney with business law firm Allen, Summers, Simpson, Lillie & Gresham PLLC in Memphis, Tenn., has found when representing clients that this can get expensive for the employer because even the best employees feel they work harder and longer than management believes they do.
By the end of December 2007, Myszczenko felt as though he had a command of the issue. He knew that the overtime he had worked for the past two years should have been paid to him at time and a half, so he requested a meeting with the director of human resources. When Myszczenko mentioned that he had called the DOL, he was surprised at how attentive the HR director became. Myszczenko was immediately barraged with questions about what he had told the DOL.
Over the course of several weeks, management studied the matter. At first, the company considered making an effort to classify the help desk jobs as exempt from overtime, but it soon saw that this effort was fruitless. Based on the government's definition, those jobs fell squarely in the "overtime pay required" category.
During the first week of March 2008, help desk management, the company's CIO and its HR director met with Myszczenko. At that meeting, management conceded that it had erred in classifying as exempt the job Myszczenko and most other help desk technicians held. Per FLSA statutes, the company paid Myszczenko and other employees overtime back-wages beginning from March 1, 2006.
Officials at the company declined to comment for this story, but sources estimate that approximately 10 to 20 employees received overtime back-wages covering the previous two years. The highest dollar figure paid to any one individual was approximately $45,000, sources familiar with the situation say. The three positions reclassified as non-exempt were workstation specialist, PC technical analyst and senior PC technical analyst.
Once the company examined the law, it dealt with the matter fairly quickly. Employees were patient because they knew management was taking action to rectify the situation.
The company has a good computerized record-keeping system, which allowed it to immediately cut checks to all affected employees. The company compensated not only those who were currently on the payroll, but also those in the affected positions who had left the organization in the previous two years.
The Greatest Myth
Despite the FLSA, which was enacted in 1938 and further refined by Congress in 2004, thousands of companies around the country still believe that overtime does not apply to their salaried IT support specialists.
Employment attorneys like Lillie, however, have the deepest insights into the matter. Lillie describes the root of this collective false belief, which lies behind many bad compensation decisions: "The greatest myth in labor and employment law is that if you pay someone a salary, you don't have to pay them overtime. Many managers believe this, but it's completely wrong," Lillie says.
David Coyle, a senior analyst with the IT research and consulting firm Gartner Inc., typically speaks with 600 to 800 help desk managers each year. Recently, one of those managers said that if he were told that he must pay his salaried IT support techs overtime, he would simply respond, "No, I don't have to because they're salaried."
Coyle is rarely asked questions about compensation. He says IT departments get their guidance primarily from their respective HR departments. Many service desk employees are hourly, and they're generally paid overtime. But Coyle confirms that there's a prevalent belief that salaried service desk employees are automatically exempt from overtime.
This issue exists beyond IT job duties that are strictly help desk related. Quest Diagnostics Inc. is a medical diagnostic-testing company based in Madison, N.J. Quest classified as exempt 238 salaried IT employees who worked nationwide as client system analysts and senior client systems analysts. John Chavez, a spokesman for the U. S. Department of Labor, Wage and Hour Division, says that their job function was setting up computers, printers and routers in the field. The DOL found that Quest should have classified these employees as eligible for overtime as non-exempt employees. In April, Quest paid these employees $688,772 in overtime back-wages, covering the previous 21 months.
A secondary myth is that job titles are a valid test for determining whether a job is exempt or non-exempt. The Quest case illustrates that calling someone a system analyst -- a title that sounds exempt based on the Computer Employee Exemption -- is trumped by the duties of the job.
Knowing that the salary test and the title test are myths still doesn't answer the question for the employee or the employer: How do I know if the position is exempt or non-exempt? Is there a test to determine whether a company should be paying someone overtime?
The Duties Test
Kara Shea, an employment attorney with Miller & Martin PLLC in Nashville, says, "I'm often asked to give advice about whether employees are exempt from the overtime requirements of federal law. I have to say that it's a pretty easy call about 70 percent of the time. But then there's that troubling 30 percent of jobs that give my clients heartburn." She continues, "IT personnel are among the best examples of 'gray area' positions. I'm talking specifically about jobs like network administrator and network analyst."
Most observers might call the government's definition of the Computer Employee Exemption a broad one (see "Exemptions by the Duties"). Shea, however, calls it a narrow definition. It's important to remember the DOL's approach is to assume that employees are eligible for overtime unless they fall into an exemption category.
Employees only "fall into" an exemption category if a significant part of their duties -- say, 50 percent or more -- qualifies them as exempt. The definition of an exempt computer employee includes a compensation component.
The bottom line is this: The primary test for overtime eligibility is, as the Computer Employee Exemption illustrates, a duties test.
|Am I Eligible for Overtime?|
The answer for help desk technicians and IT support specialists is contained in a guidance letter from the U.S. Department of Labor (DOL), issued in October 2006. The full text of the "Opinion Letter" can be found on the DOL Web site.
Summary: The DOL ruled that IT support specialists and help desk workers do not qualify for either the "administrative" or "computer professionals" exemption to the Fair Labor Standards Act.
The DOL determined that the IT position is not exempt from overtime and minimum wage requirements because the position, which requires only a high school diploma, does not require the discretion and independent judgment necessary to qualify for the administrative exemption and lacks the development and analysis skills necessary for the computer professional exemption.
The Greatest Irony
The greatest irony is that overtime pay, which management almost universally considers bad news for a company, actually has the potential to be a valuable tool in the creation of a great technical support team.
IT managers will not easily accept this thought because conventional wisdom dictates that overtime is an expense -- therefore, it's the sworn enemy of profitability. Conventional wisdom also dictates that overtime is the worst expense in business, but that some expenses are necessary to run a business. The trick is in knowing which expenses are good investments.
Overtime pay for technical support teams is not only the law-it's also a good investment, experts say. It's a good investment because it serves as an important weapon in the attack against threats to any company's productivity, profitability and even morale, many industry observers believe.
"There's no doubt that overtime opportunities contribute to job satisfaction for some technicians," says Paul C. Smith, distributed support manager for insurance provider Aetna Inc. "As with any diverse group of employees, some welcome the chance to add to their income, while others are satisfied with their 40 hours and base pay. In my experience, the availability of overtime for support technicians has a positive impact on both recruiting and retaining these individuals."
The real threat is in the turnover of experienced, customer-service-centered IT technicians. These are technicians who are homegrown, not ones hired from the outside with lots of experience. Statistics show such technicians have likely been with a company at least three years intrinsically know their company's technology and customer needs and are familiar with proprietary applications, the company's network, its build processes and the corporate culture.
And when they answer a support call, the questions get answered -- or when they go desk-side, the problem is fixed. This has been proven to minimize downtime and improve cost efficiencies, observers note.
However, experienced technicians can be run off a job by being overworked and underpaid. Adequate staffing is essential: If a company has enough bench strength to do quality work, then overtime doesn't have to be mandatory.
Some observers believe that Jan. 1 is the ideal time to roll out overtime pay, and that HR needs to lead the charge. They think that it's a good idea to bring in a consulting employment attorney to do a quick job-classification audit, as some IT positions are not easily classified. Instead of sticking one's head in the sand on this issue, some counsel that it would be more constructive to see the possibilities in overtime pay as a way to build a cohesive, experienced technical support group that will stay together.
As in any line of work, companies have to pay for excellence. But the question many IT managers have to ask themselves is, "Does excellence pay for itself?"