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

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:
  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 the user or system design specifications.
  3. The design, documentation, testing, creation, or modification of computer programs related to machine operating systems.
  4. 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.

About the author, Rhamy

Rhamy grew up watching and working with his mother and grandmother in the senior insurance market. This familiarity with the struggles faced by people trying to navigate the incredibly complicated and heavily regulated healthcare market led him to start Poplar Financial while working on his degree at the University of Memphis. After completing his MBA and Bachelors in Finance and Economics, Rhamy guided Poplar Financial through the disruptive opportunity that is the Affordable Care Act. Since then Poplar Financial has received numerous awards from major insurance carriers and has completed its fourth year in a row of doubling in size. Now his team focuses on the processes around human resources and specializes in providing companies with between 20 and 1000 employees with the payroll, benefits, and HR needs.

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