If you’re a highly compensated computer guru that the company depends upon to design and implement computer solutions, you probably can’t get overtime.

Mock v. Federal Home Loan Mortgage Corporation, Civil Action No. 1:13cv1292 (E.D.Va. July 15, 2014). Dan Mock brought a lawsuit against his employer, Federal Home Loan Mortgage Corporation (also known as Freddie Mac), alleging that Freddie Mac had misclassified him as an exempt employee for purposes of overtime compensation under the Fair Labor Standards Act (FLSA). Freddie Mac, after some discovery, filed a motion for summary judgment, arguing the Mock was exempt from overtime under three separate exemptions, the “highly compensated employee” exemption, the “administrative” exemption, and the “computer workers” exemption. As with all exemptions to the FLSA’s wage and hour requirements, Freddie Mac, as the employer, had the burden of proving that the employee’s job duties fit the exemptions.

Several facts were not in dispute. Mock was a full-time, salaried employee working in the Infrastructure Engineering Group (“lEG”) within Freddie Mac’s Information Technology (“IT”) Division. Since at least 2010, Mock’s base salary had exceeded $100,000 per year. Mock was chosen to be a member of the lEG when it was created because of his aptitude and IT expertise, and in April, 2010, Mock s job title changed to “Engineering Senior.” In March, 2012, Mock was promoted to “Engineering Tech Lead.” All of the engineers in the lEG were classified as “exempt” under the FLSA. Mock and other members of the lEG performed non-manual office work designing and developing computing solutions to meet Freddie Mac’s business needs, including selecting the appropriate technologies to use in addressing computing needs, developing automation scripts and processes to manage computing platforms, and providing their solutions to the company for implementation.

Mock was considered the subject matter expert and engineering lead for Freddie Mac’s virtualization infrastructure and “VMware,” an intricate software with various component products that permits the user to install and use software programs “virtually” without affecting actual computers, and which increases information technology storage capacity and space while decreasing the need for physical hardware. Approximately 75% of Freddie Mac’s computer operating system is “virtualized.”

Mock and Freddie Mac differed in their views of the scope of Mock’s duties. Freddie Mac asserted that Mock designed and engineered VMware upgrades, by researching new versions of the product, choosing new components, and setting the upgrade path for existing components. Also according to Freddie Mac, Mock performed cost/benefit analyses regarding new VMware software; advised senior-level management about new software, including potential purchases; and acted as a facilitator between management and vendors concerning new products and technology. In particular, when Freddie Mac purchased new technology, Mock would write programming scripts or configure the technology to fit into Freddie Mac’s complex computer system. To achieve this, Mock would test the new technology in a non-production environment to see if it was compatible with Freddie Mac’s system; if the technology was incompatible, Mock would design solutions and configure the technology to fit into the system.

For his part, Mock argued that he did not recommend or select new technologies for Freddie Mac’s users; rather, a different branch of IEG selected technologies, designed environments, and presented recommendations to senior level management for approval. Mock argued that he received instructions from the IEG, which he then implemented, and that the information he provided to senior-level management was merely digested from documentation by vendors.

The problem with Mock’s argument, according to the Court, was that it was unsupported by evidence and was, in some instances, contradicted by Mock’s own self-assessments of his accomplishments. The Court granted the Motion for Summary Judgment and held that all three of the asserted exemptions applied.

The Highly Compensated Employee Exemption

The regulations provide that an “employee with total annual compensation of at least $100,000 is deemed exempt under … the Act if the employee customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee.” The regulations define “customarily and regularly” to mean “a frequency that must be greater than occasional but which, of course, may be less than constant.” This includes “work normally and recurrently performed every workweek” but does not include “isolated or one-time tasks.”

The highly compensated employee exemption “applies only to employees whose primary duty includes performing office or non-manual work.” Employees who perform work involving repetitive operations with their hands, physical skill, and energy are not exempt under this section no matter how highly paid they might be. An employee’s “primary duty” is “the principal, main, major or most important duty that the employee performs.” Determining what an employee’s primary duty is under that definition is fact-intensive and holistic. Factors to consider determining the primary duty of an employee include, but are not limited to, the relative importance of the exempt duties as compared with other types of duties; the amount of time spent performing exempt work; the employee’s relative freedom from direct supervision; and the relationship between the salary and the wages paid to other employees for the kind of nonexempt work performed by the employee.

The regulations provide that the amount of time spent performing exempt work can be a useful guide in determining whether exempt work is the primary duty of an employee. Usually, but not always, employees who spend more than 50 percent of their time performing exempt work will generally satisfy the primary duty requirement unless the other factors do not support that conclusion. The regulations were at this point quoted with approval by the Court with this example: “assistant managers in a retail establishment who perform exempt executive work such as supervising and directing the work of other employees, ordering merchandise, managing the budget and authorizing payment of bills may have management as their primary duty even if the assistant managers spend more than 50 percent of the time performing nonexempt work such as running the cash register; however, if such assistant managers are closely supervised and earn little more than the nonexempt employees, the assistant managers generally would not satisfy the primary duty requirement.”

There was no dispute that Mock was a highly compensated employee who performed non-manual work. The remaining question was whether Mock “customarily and regularly” performed the primary duties of an exempt administrative employee. Accordingly, the Court examined whether the Administrative Exemption applied.

The Administrative Exemption

An employee qualifies for the administrative exemption if (1) the employee is compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week; (2) the employee’s primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and {3} the employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. There was no dispute that Mock was paid more than $455 a week, satisfying the first part of the test. As to the second qualification for the exemption, the regulations state that work is “directly related to the management or general business operations” if it is “directly related to assisting with the running or servicing of the business.” This includes “functional areas such as . . . computer network, internet and database administration.” Significantly, however, technicians whose job duties are merely to keep the computer networks operating and who are not required to apply highly-specialized knowledge in computer systems analysis, programming, and software engineering fall outside of the exemption.

Mock argued that his job was limited to maintaining the IT infrastructure. He acknowledged his involvement in many IT projects – for which he had received glowing and even unsolicited praise from company executives – but said that those other projects had all been led by others, designed by others, developed by others, and performed by Mock according to well documented policies and procedures. With respect to his expertise in VMWare, and there was little dispute that he was the “go to” employee on issues related to that virtualization software, he argued that merely being the best at it did not make it one of his duties for the purposes of the exemption. The Court was having none of that, however, and concluded that the evidence was overwhelming that Mock’s primary duty was the performance of non-manual work related to the general business operations of Freddie Mac.

The third factor for the administrative exemption is “the exercise of discretion and independent judgment with respect to matters of significance.” The regulations explain that “the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered.” The term “matters of significance” refers to the level of importance or consequence of the work performed.

The term “independent judgment” suggests that an exempt employee would be free from direction or supervision; however, the regulations provide that “employees can exercise discretion and independent judgment even if their decisions or recommendations are reviewed at a higher level.” In other, stronger, words, the term “does not require that the decisions made by an employee have a finality that goes with unlimited authority and a complete absence of review.” In addition, “[t]he decisions made as a result of the exercise of discretion and independent judgment may consist of recommendations for action rather than the actual taking of action.” Finally, “[t]he exercise of discretion and independent judgment must be more than the use of skill in applying well-established techniques, procedures or specific standards described in manuals or other sources” and the term “does not include clerical or secretarial work, recording or tabulating data, or performing other mechanical, repetitive, recurrent or routine work.”

As to this factor, Mock argued that his duties of troubleshooting computer systems involved nothing more than applying well-established techniques and little in the way of discretion or independent judgment. Freddie Mac, on the other hand, offered the testimony of Mock’s supervisor, who said, “[Mock] did not come to me and ask if he could work on this task or that task, or tell me he was going to spend a certain number of hours working to resolve a problem. We would discuss issues and consult about approaches he was considering to take, but he made the decisions regarding how to approach a problem and whether he would start working on a problem at midnight or at 3 o’clock in the morning. … I did not oversee [Mock’s] work in that way.” Taking this evidence into consideration, the Court found it clear that Mock’s primary duties involved evaluation, comparison, and application of his knowledge and experience free from immediate direction or supervision.

From this, the Court concluded that Mock was exempt from overtime compensation under the administrative exemption and, therefore, also exempt under the highly compensation employee exemption.

The Computer Professional Exemption

The computer professional exemption applies to computer employees whose primary duty consists 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 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.

Mock had admitted in his own employee self-evaluations that his job duties included “software development, design, automation, implementation, upgrading, and deployment.” The Court noted that Mock not only designed software, it was also uncontroverted that he tested and prototyped software for Freddie Mac. Mock argued that the exemption did not apply because Mock did not write the code itself or actually create the software, but the Court found that Mock’s argument would require the Court to construe the exemption too narrowly. The Court then concluded that the Computer Professional Exemption applied to Mock’s employment.

In its discussion of each of the three exemptions in play in Mock’s case, the Court pointed out the determining whether an exemption applies is entirely dependent on a factual inquiry: what, specifically, does the employee do? It is clearly not a scientific process, because the inquiry requires the Court to measure intangibles, such as whether an occurrence is more than “occasional,” but less than “constant,” or whether an employee exercises enough discretion to make mostlyindependent judgments on “significant” matters. Clearly, “occasional” is different from “constant” but when does an occurrence move from one category to the next? Once a week? Twice a day? Monthly? Just as clearly, some business decisions are significant just as others are insignificant, but where is the line drawn between them? Even the definitions provided to help guide the interpretation of the regulations offer more shades of gray than clear black and white. In hindsight, it may seem like Mock was obviously exempt from overtime under this set of facts, but it is much less predictable than that. If the evidence had been slightly stronger that, as Mock contended, he was Freddie Mac’s best troubleshooter, but only a troubleshooter, then the Court might have ruled the other way.

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