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More overtime tussles for tech companies?

Lawsuits over overtime pay could become more common as the tech sector grapples with shifting employment regulations.

A spate of lawsuits and new government rules has the tech industry scratching its head over overtime.

The decision earlier this year by computer-game titan Electronic Arts to reclassify some of its employees as hourly workers eligible for overtime pay but not for bonuses or stock options has helped bring the issue to the fore.

EA's move followed several suits filed by workers who claim game-software companies, and tech-services giant Computer Sciences, violated overtime rules. And still more lawsuits could be ahead, partly because of a controversial--and some say confusing--revamping of federal overtime rules last year.


What's new:
A spate of lawsuits and new government rules has tech workers and their employers scratching their heads over overtime.

Bottom line:
Thousands of technology professionals could be missing out on compensation they deserve, advocates say, while employers could face a higher risk of lawsuits to ascertain whether they're getting compensation right.

More stories on this topic

"It's become very complicated," said Jeffrey Tarter, executive director of the Association of Support Professionals, who also pointed to the muddying effect of the shift to round-the-clock tech support. "The rules are pretty close to incomprehensible on this issue."

For employers, the uncertainty could lead to new headaches in calculating who gets overtime pay, and a higher risk of lawsuits to sort out whether they got it right. In addition, industry leaders claim overtime litigation and rules--which are stricter in the tech mecca of California--threaten to undermine the entrepreneurial spirit and economic viability of technology companies.

But worker advocates argue that thousands of tech professionals could be missing out on compensation they deserve, while others could lose overtime eligibility.

Allen Graves, who represents a plaintiff in an overtime pay lawsuit against Vivendi Universal Games, makes the case that many programmers in California making less than the state's statutory ceiling--roughly $46 per hour--are routinely being cheated when they work long hours.

"The vast majority of computer programmers are entitled to overtime pay and are not getting it," he said.

Do pros punch the clock?
Underlying the issue is what tech workers themselves think about earning overtime pay. Historically, the field has been defined largely as professional work, having little in common with jobs that require punching a clock. But that may be changing in era of outsourcing, offshoring and contingent work relationships, said Rob Helm, director of research at analysis firm Directions on Microsoft.

Especially for those computer pros working on a contract basis or through a staffing company, overtime pay looks attractive, he said.

"When you have work, you better get compensated pretty heavily," Helm said. "Because you may be headed for a period when you don't have any."

A growing number of employees are claiming technology companies are violating overtime pay law. In the computer games sector in particular, workers have been speaking out against schedules that can sometimes mean 80-hour weeks for months on end.

Electronic Arts has been a for this sort of criticism and is the target of two class-action lawsuits claiming it failed to pay proper overtime wages to game developers. Similar suits have been filed against game makers Sony Computer Entertainment America and Vivendi Universal Games. The companies have declined to discuss the suits, which involve allegations that programmers and image production workers were improperly classified as exempt from overtime pay requirements.

One California-based image production artist at EA, who spoke on condition of anonymity, said he routinely worked 70 hours a week throughout last summer and fall without any formal overtime compensation to finish a game. He earned a salary of about $49,000, with a bonus of roughly $2,000. Although his team was given two weeks off in December after the game shipped, he argues the time off was not a fair substitute for the overtime pay he claims he was owed.

"It's pretty much like you're working double time," he said. "A couple weeks of comp time just doesn't add up."

The game industry isn't the only corner of the tech world facing overtime-related litigation.

Computer Sciences, which provides services such as systems integration, consulting and application outsourcing, has been sued on two occasions for allegedly failing to pay tech support employees overtime wages they deserved. In one case, it agreed to a $24 million settlement that covers some 30,000 workers--nearly 40 percent of the company's staff--according to an attorney representing plaintiffs in the suit. The company has declined to comment on either suit.

Lawyers say more such action may be on the way. "We've had calls from people at some other major IT companies regarding their (overtime) exemption status, and we're looking into this," said Todd Jackson, a plaintiffs' attorney working on the Computer Sciences case.

Making sense of the rules
Part of the problem is uncertainty about federal overtime rules, which were overhauled last year. The regulations require that most employees be paid one-and-a-half times the normal rate for hours beyond 40 in a work week. There are a number of exceptions to this rule, including a specific exemption for computer employees.

Under the computer exemption, employers don't have to pay overtime to workers who meet certain conditions. Those workers must:

• earn at least $27.63 an hour--roughly $57,450 for a year's worth of 40-hour weeks, if compensated on an hourly basis; or

• earn at least $455 per week--which translates to about $23,650 annually, if compensated on a salary or fee basis; and

• in either case, be employed as a computer systems analyst, programmer, software engineer or similarly skilled worker in the field.

In addition, their primary duty must consist of one or more of several tasks, such as applying systems analysis techniques to determine software specifications.

The computer employee exemption was changed last year to raise the salary threshold from $250 per week. But other changes make things tougher on workers, advocates say.

According to the AFL-CIO-affiliated Department for Professional Employees, the new regulation dropped a requirement that in order for computer programmers to be exempt, they must do work that requires the consistent exercise of discretion and judgment. In addition, the Labor Department's test no longer specifies that a worker have a "primary duty of performing work that requires theoretical and practical application of highly specialized knowledge in computer systems analysis, programming, and software engineering."

In a report written last year before the new overtime rules took effect, the Economic Policy Institute said cutting these requirements "makes the exemption applicable to less-skilled employees." The report predicted that 87,000 computer programmers would lose the right to overtime pay thanks to changes in the federal regulations.

See you in court?
Al Robinson, deputy administrator for the Labor Department's Wage and Hours Division, said the new computer exemption rules consolidate regulations in a way that reflects Congress' intention. Robinson also said it's "the exception rather than the rule" to find the new overtime rules confusing and that the changes were needed to make decades-old guidelines relevant to the 21st century.

The Bush administration has said its overhaul of the rules would strengthen overtime rights for 6.7 million American workers. Defenders of the changes point to a recent article in The Wall Street Journal that concluded that "more workers appear to have gained overtime protections than lost them."

But Mike Gildea, executive director of the AFL-CIO's Department for Professional Employees, argued that the full impact of the revisions hasn't been felt yet. "In the long run, this is going to hurt a lot of professionals--certainly a lot of tech workers," he said.

Gildea also said the federal overtime changes may well trigger lawsuits, in part because of language that's not particularly clear. "It's going to be difficult to sort out who's covered and who's not," he said.

California's courts also may see more overtime litigation involving tech workers. The state has similar exemptions to the federal overtime rules, with some additional employee protections. California's exemption for computer software workers requires that the hourly rate of pay is at least $45.84--equivalent to annual earnings of about $95,350.

Changing times
Long hours have long been a part of the computer industry, but they've been declining in the software world. In addition, intense stretches of work in the tech world frequently have been rewarded in ways other than overtime pay. Companies in Silicon Valley and other tech meccas have doled out relatively high salaries, work-site perks, a degree of professional independence and a chance for a big stock payoff.

But that employment compact has come under new scrutiny. Many tech professionals who began their careers as singles now have families, making them more eager to leave the office in time for dinner at home. Employees throughout the industry also may feel less loyal after the wave of job cuts that came with the dot-com collapse and as some jobs move offshore. What's more, the financial incentive to sleep under one's desk has ebbed in the post-Internet bubble era.

Gildea said tech workers should be glad to get overtime pay: "I don't know why people wouldn't want to get the premium pay they're entitled to under federal law--for the sake of what? To identify as elite professionals?"

Well, yes, Tarter suggested. He said the wisest policy for software tech support departments probably is to assume that employees are eligible for overtime--but that's not necessarily what techies want. "Tech support employees don't like being called hourly workers," Tarter said. "That's seen as applying to checkout workers at Wal-Mart."

The recent rash of overtime suits in the game industry, and California's labor rules, could well backfire, EA spokesman Jeff Brown warned. He said higher labor costs could push the company to move more of its work out of the state, to places including a new studio being built in China.

"This isn't a problem (just) for EA," Brown said. "This is a problem for the state of California."

Tom Buscaglia, an attorney who founded an organization to increase the presence of the game industry in Florida, might be expected to cheer an exodus of companies from California. But he doubts that game makers would reduce their exposure to overtime lawsuits much by simply moving work across the country. Most of the workers being added to make large teams for state-of-the-art games are developers doing assembly line-type graphics and animation tasks, who would be eligible for overtime, he said.

Overall, Buscaglia estimated that with games under development for the next generation of consoles, as many as 50 percent of developers could be eligible for overtime.

To him, the lawsuits are a wake-up call for the game industry to switch to more reasonable hours and to keep talented people from leaving the industry. "Ultimately, it makes for better games," he said. "And it makes for a better lifestyle for the people who make them."

But Harris Miller, president of the Information Technology Association of America trade group, has a grimmer view. Moving to more of a 9-to-5, clock-punching culture will hurt the country's computer sector, he argues.

"One of the strengths of the tech industry has been that there has not been a lot of we-against-they mentality regarding labor and management," Miller said. "You run the risk of losing the collaborative relationship that has been so productive."