The Computer-Related Occupation Exemption under the Service Contract Act
 
December 26, 2001
 
David Dempsey - Northern Virginia

Under the Service Contract Act, 41 U.S.C. § 351, et. seq., executives, administrative personnel, and professionals usually are exempt from the minimum wage and fringe benefit determinations published by the Department of Labor. The Service Contract Act (SCA) operates in tandem with the Fair Labor Standards Act (FLSA), 20 U.S.C. § 213(a)(1). If a service employee is exempt under the FLSA, that service employee will be exempt from the SCA. As a practical matter, this means that exempt personnel are not under the overtime provisions of the FLSA (i.e., no "time and a half").

Persons working in computer-related occupations may be exempt from the SCA requirements because they fit within one of the following categories:

Computer Professionals

Computer employees fall under the administrative or professional employee exemption if the employer can demonstrate that such employee exercises independent discretion and judgment, requires no, or only limited, supervision, etc. In order to be exempt from the FLSA (and thus from the SCA), the primary duties of a "computer professional" have to include 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

• the design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to users of system design specifications

• the design, documentation, testing, creation or modification of computer programs related to machine operating systems

No academic degree is required for this exemption; a combination of education, training and experience is satisfactory. In other words, the "computer professional" exemption is not the "learned profession" exemption under 29 C.F.R. § 41.301(e)(1). Expressly excluded from the context of this exemption are those employees engaged in the operation of computers (key entry occupations) or in the repair or maintenance of "ADP" (automatic data processing) hardware and related equipment.

Computer-Related Occupations

Within the "professional employee" exemption, service employees in "computer-related occupations" (i.e., computer systems analysts, computer programmers, software engineers, and "other similarly skilled" computer personnel) have a special statutory exemption. This exemption results from a unique legislative and regulatory history, which is too involved to describe in this article. However, the result is that computer-related occupations are exempt from the overtime pay provisions of the FSLA if the workers are paid at least $27.63 an hour. See Labor Department's Employment Standards Administration Fact Sheet No. 96-13.

Service Employees Engaged In the Repair and Maintenance of ADP Equipment, Scientific Equipment and Office Machines

Administrative exemptions from the SCA are authorized for the maintenance, calibration and/or repair of

• automated data processing equipment and office information/word processing systems

• computer-based scientific equipment and medical apparatus or equipment

• office/business machines not otherwise exempt, where such services are performed by the manufacturer or supplier of the equipment

For this exemption to apply, four specific tests must be satisfied. First, the equipment must be "commercial items that are used regularly for other than Government purposes, and are sold or traded by the contractor in substantial quantities to the general public in the normal course of business operations." Second, the maintenance or repair services must be furnished at prices that are, or be based on, an established catalog or market price. Third, the contractor must utilize the same compensation plan (i.e., wages and fringe benefits) for the service employees performing work under the government contract as the contractor employs for equivalent employees servicing the same equipment of commercial customers. Fourth, the contractor must certify to the first three tests. See 29 C.F.R. § 4.123(e)(2), FAR 22.1003-4(b)(4).

What contractors must realize is that the "ADP exemption" is completely unrelated to the "computer professional" and "computer-related occupation" exemptions discussed above. The three exemptions occur under different standards (i.e., experience versus hourly wage versus commercial item) and have different tests. Each is available to a contractor, if the contractor can demonstrate (through job descriptions, payroll records, commercial item lists) that a service employee qualifies for the exemption.

For more information, contact David Dempsey at 1-888-688-8500 or via e-mail at ddempsey@hklaw.com.