This story was written by Keith Dawson for UBM DeusM’s community Web site Business Agility, sponsored by IBM. It is archived here for informational purposes only because the Business Agility site is no more. This material is Copyright 2012 by UBM DeusM.

'CPU Act' Could End IT Overtime Pay

A bill introduced in the Senate would effectively eliminates overtime pay for all IT professionals in the US.

The Computer Professionals Update Act, if passed into law, would effectively eliminate overtime pay for IT professionals, including those who secure, configure, integrate, and debug computer systems.

S. 1747, the cleverly nicknamed "CPU Act," was introduced in the Senate last October by Kay Hagan (D-NC) to expand the kinds of technology workers who aren't automatically entitled to overtime. The bill is co-sponsored by six senators from both sides of the aisle. It has been referred to the Committee on Health, Education, Labor, and Pensions. News accounts claim that the legislation is being strongly pushed by big multinationals.

More than three million people work in computer-related jobs in the US. By some estimates as many as a quarter of them currently receive overtime pay -- time and a half after 40 hours of work in a week or 8 hours in a day.

The 1938 Fair Labor Standards Act (FLSA) was amended in 1990 to add certain computer professionals to the list of those exempt from overtime pay. Computer employees who are paid fixed salaries of at least $23,660 per year, or who get hourly wages of at least $27.63, and who perform job duties such as systems analysis and programming, aren't entitled to automatic overtime pay. Some other functions, such as technical writing, QA, security, and network analysis, don't fall under the federal exemptions and so should qualify for overtime pay. (Some states, such as California, have laws that differ significantly from the federal statutes.)

The intent of the FSLA was to federalize wages so that corporations could not arbitrage jobs between high-wage and low-wage states. It intended to boost employment by "spreading" jobs -- making it more difficult for a corporation to demand a 90-hour workweek from an employee, for example, because it was cheaper to hire two employees who would each work 45 hours.

Employees denied overtime pay, who believe their jobs were wrongly characterized in order to keep their pay down, have been suing corporations in increasing numbers under the FLSA. Some law firms have made a good business of pursuing such class-action lawsuits. One, Lieff Cabraser Heimann & Bernstein, boasts on its Website that it has won $138 million in overtime pay for workers between 2006 and 2011 -- including two judgements against IBM totaling $72.7 million. From those cases the law firm probably cleared between $46 million and $55 million.

Supporters of the CPU Act say the existing law fails to account for the substantial technological changes over the past 20 years, and cite the lawsuits as an example of the need for clarification.

Opponents point to the judgement of the Congressional Research Service, a nonpartisan agency within the Library of Congress that conducts research and analysis for legislators, which states that the bill "effectively eliminates overtime pay for all IT professionals." (To get to this summary, go to Thomas, search for bill "S. 1747," and click the "CRS Summary" link. Thomas does not generate persistent URLs.)

Ross Eisenbrey, who in 1990 was the legislative director for a member of the House committee that drafted the exemption from overtime regulations, writes:

The original rationale was that the exemption would apply only to highly skilled workers who had so much authority that they could essentially control their own hours. At the time, it was understood that it would apply only to the very top experts in computer software.

Eisenbrey believes that the law does indeed need updating, but that the CPU Act updates the wrong part of it. It is the income thresholds that are woefully out of date; today the $23K cutoff represents poverty wages. The so-called duties tests should stay, so that the exemption continues to apply only to the employees with the greatest skills and responsibility.

The bill was introduced with four co-sponsors and has garnered only two since last fall. No corresponding legislation has been introduced in the House. Keep an eye on the live GovTrack widget above for any movement on this bill.

Of the 400-some Internet users who have voted at PopVox, 97 percent oppose the CPU Act.