HOW TO DETERMINE OVERTIME PAY ELIGIBILITY (as of 1/1/2021)

HOW TO DETERMINE OVERTIME PAY ELIGIBILITY (as of 1/1/2022)

W2 placements are paid for all hours worked. Whether or not an employee will receive "overtime" pay at their regular rate of pay (also known as "straight time") or at time-and-a-half (designated as "premium time" in Job Diva) depends on whether the pay rate and work performed complies with the exemption for employees in computer-related occupations ("Computer Employee") under the Fair Labor Standards Act (FLSA), or for those W2 placements residing or working in the state of California, exemptions for Computer Professional Employees as outlined under CA law.

NOTE: Any TCM placement other than those considered exempt under the "Computer Employee" regulations in the FLSA or "Computer Professional Employee" under CA statutes must be paid time-and-a-half for hours worked over 40 during the work week (or beyond 8 for the work day in CA). TCM pays and bills by the hour, and does not provide a salary or guaranteed rate of pay required by other exemptions under the FLSA. A fact sheet outlining the various exemptions within the FLSA is posted in Sitefinity under Sales and Resource.

If a W2 placement is deemed exempt as a "Computer Employee" (under the FLSA) or "Computer Professional Employee" (under CA statutes), the individual will be paid at their regular rate of pay (known as "straight time") for all hours worked. If the employee is deemed non-exempt, the individual will receive time-and-a-half for hours worked over 40 in the work week, or above 8 per day under CA law. The decision is based on the employee's regular rate of pay AND primary job duties.

We encourage communication and discussion with the client to obtain appropriate and valid information on the nature of the work to be performed to enable correct classification. A worksheet ("Computer Employee Exemption Worksheet") for placements outside of the state of California subject to the FLSA, and a worksheet ("Computer Professional Employee Exemption Worksheet for the State of California") for placements within the state of CA (subject to CA statutes), are attached to provide guidance for these discussions. Misclassifying an employee as exempt when he/she should be non-exempt carries heavy penalties under DOL regulations and in CA. You should assume (as the law does) that an employee is non-exempt unless proven otherwise.

It has been our practice to designate whether or not an employee is exempt to contain our payroll costs and client billing rates. If a position is non-exempt, TCM will be billing the client at a higher rate to recoup its costs (some client contracts may restrict us from increasing the billing rate). If a client wants to contain costs, the best option is to prohibit the employee from working over 40 hours each work week (or above 8 per day under CA law). Please note that if an employee reports overtime hours and is eligible for time-and-a-half, TCM must pay the required wage ? whether we can bill the client or not.

How to Determine Exempt or Non-Exempt Status (for placements outside the state of California):

The Fair Labor Standards Act (FLSA) was revised several years ago to require both an hourly pay test and a job duties test to determine whether or not an employee in computer-related occupations is exempt or non-exempt.

To qualify for the exemption, an employee must be paid at a rate not less than $27.63 per hour (or $28.92 in COLORADO) AND be employed as a computer systems analyst, computer programmer,

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software engineer, or other similarly skilled worker in the computer field. The primary duty (occupying 50% or more time) must consist 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; or

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

How to Determine Exempt or Non-Exempt Status (for placements within the state of California):

The CA statutes apply to any W2 placement working in the CA, regardless of state of residence. To qualify for the CA exemption, an employee must be paid not less than $50.00 per hour (this rate of pay is in effect as of January 1, 2022). Further, the employee must be primarily engaged in work that is intellectual or creative and that requires the exercise of discretion and independent judgment with duties that consist of 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 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 documentation, testing, creation or modification of computer programs related to the design of software or hardware for computer operating systems.

The employee must be highly skilled and proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming and software engineering.

The CA exemption does not apply to a trainee or entry level position, or an employee who has not attained the level of skill and expertise necessary to work independently and without close supervision, or is engaged in the operations of computers or in the manufacture, repair or maintenance of computer hardware and related equipment.

IMPORTANT INFORMATION ON DESIGNATING OVERTIME PAY ON THE JOB DIVA PLACEMENT RECORD:

There are three options in the drop-down under "OT Pay" that will determine the rate of pay for hours over 40 for the work week (or over 8 for the work day if the placement works in CA):

1) If the field is left BLANK, the placement record will not be accepted and will be returned to you for correction.

2) Choose "OT at premium rate" if the position is non-exempt and hours will be paid at timeand-a-half.

3) Choose "OT at straight time" if the position is exempt and hours will be paid at the "regular" or "straight time" rate.

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COMPUTER EMPLOYEE EXEMPTION WORKSHEET

The Fair Labor Standards Act (FLSA) requires that most employees in the United States be paid at least the Federal minimum wage for all hours worked and overtime pay at time-and-one-half the regular rate of pay for all hours worked over 40 hours in a workweek. However, there is an exemption from both minimum wage and overtime pay for certain computer systems analysts, computer programmers, software engineers, and other similarly skilled workers in the computer field. The rate of pay AND primary duty of the employee determines whether or not the position is exempt. This worksheet will enable you to make the determination.

What is the "primary duty" of the job to be performed? This is the main or major duty that the employee does in their day-to-day work (occupying 50% or more of their time).

ANSWER:

WAGE TEST

1) Is the employee being paid $27.63 (or $28.92 in CO) per hour or more?

Yes

No

If you answered "no", STOP. The job is non-exempt and the employee must be

paid time-and-a-half for hours worked over 40 in a workweek. No further analysis

is required. If you answered yes, do the primary duty test questions below.

PRIMARY DUTY TEST

2) Does the employee's primary work consist of the application of systems

analysis techniques and procedures, including consulting with users, to

Yes

No

determine hardware, software or system functional specifications?

3) Does the employee's primary work consist of the design, development,

documentation, analysis, creation, testing or modification of computer systems Yes

No

or programs, including prototypes, based on and related to user or system

design specifications?

4) Does the employee's primary work consist of the design, documentation,

testing, creation or modification of computer programs related to machine

Yes

No

operating systems?

5) Does the employee's primary work consist of a combination of the above

duties, the performance of which requires the same level of skills?

Yes

No

If you answered "no" to questions (2) through (5), the job is non-exempt and the

employee must be paid time-and-a-half, regardless of the rate of pay. If you

answered yes to any of questions (2) through (5), the job is exempt (pay must be

$27.63 or more per hour (or $28.92 in CO)).

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COMPUTER PROFESSIONAL EMPLOYEE EXEMPTION WORKSHEET

FOR THE STATE OF CALIFORNIA

The Fair Labor Standards Act (FLSA) requires that most employees in the United States be paid at least the Federal minimum wage for all hours worked and overtime pay at time-and-one-half the regular rate of pay for all hours worked over 40 hours in a workweek. While there is an exemption under federal law from both minimum wage and overtime pay for certain IT professionals, the state of California has its own regulations regarding IT professionals and the computer software exemption. This applies to any W2 placement working in the state of California, whether the individual is a resident or not. The following will enable you to make the determination of whether a W2 placement is exempt or not from the law.

WAGE TEST

1) Is the employee being paid $50.00 per hour or more? (This rate of pay is in effect for CY

Yes No

2022 )

If you answered "no", STOP. The job is non-exempt and the employee must be paid time-and-a-half for

hours worked over 8 per day, double time for work over 12 hours per day or 40 in a workweek, etc. No

further analysis is required. If you answered yes, do the primary duty test questions below.

PRIMARY DUTY TESTS

The employee must be primarily engaged in work that is intellectual or creative and that requires the exercise

of discretion and independent judgment, and the employee is primarily engaged in duties that consist of one

or more of the following:

The application of systems analysis techniques and procedures, including consulting

with users, to determine hardware, software or system functional specifications.

Yes No

The design, development, documentation, analysis, creation, testing or modification of

computer systems or programs, including prototypes, based on and related to user or Yes No

system design specifications.

The documentation, testing, creation, or modification of computer programs related to

the design of software or hardware for computer operating systems.

Yes No

The employee is highly skilled and is proficient in the theoretical and practical application of

highly specialized information to computer systems analysis, programming, and software

Yes No

engineering. A job title shall not be determinative of the applicability of this exemption.

NOTE: The exemption does not apply to an Employee for any of the following:

The employee is a trainee or in an entry level position and is learning to become proficient in the

theoretical and practical application of highly specialized information to computer systems

analysis, programming, and software engineering;

The employee is in a computer related occupation but has not attained the level of skill and

expertise necessary to work independently and without close supervision;

The employee is engaged in the operation of computers or in the manufacture, repair or

maintenance of computer hardware and related equipment;

The employee is an engineer, drafter, machinist or other professional whose work is highly

dependent upon or facilitated by the use of computers and computer software programs and

who is skilled in computer aided design software, including CAD/CAM, but who is not in a

computer systems analysis or programming occupation.

If you answered "no" to all of the above, and the note on exemptions above applies, the job is non-

exempt and the employee must be paid time-and-a-half, regardless of the rate of pay. If you answered

yes to any of questions bulleted questions, the job is exempt (pay must be $50.00 or more per hour).

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