NEW YORK COURT HOLDS COMPUTER EMPLOYEES WERE PROPERLY CLASSIFIED AS EXEMPT NOTWITHSTANDING SUBSEQUENT RECLASSIFICATION OF POSITION AS NON-EXEMPT.

In a heartening decision for employers, the United States District Court for the Southern District of New York recently held, in Clarke v. JPMorgan Chase Bank, N.A., No. 08 CV 2400 (CM), 2010 U.S. Dist. LEXIS 33264 (S.D.N.Y. March 26, 2010), that the mere reclassification of employees as non-exempt was not affirmative evidence of prior misclassification, nor was it evidence that the employer willfully violated the FLSA.  Apart from this important holding, the decision also provides a thorough analysis of the computer professional exemption under the current DOL regulations.

The lead plaintiffs in this purported collective action were Andrew Clarke and Tapas Sarkar, both of whom were employed by JPMorgan Chase (“JPM”) in technical computer-related positions.  On August 1, 2005, Clarke was one of hundreds of JPM employee who, pursuant to JPM’s periodic review of employees’ FLSA status, was reclassified as non-exempt.  Thereafter, until his resignation in June 2007, Clarke received premium pay for overtime hours.

Sarkar began working for JPM in December 2002 as a member of JPM’s Global Technology Infrastructure.  Prior to joining JPM, Sarkar obtained two industry recognized leading computer certifications, one of which involved a ten month course of study and required Sarkar to pass seven separate examinations.  The majority of Sarkar’s time was spent handling capacity management for JPM’s Northeast region.  Specifically, it was Sarkar’s responsibility to make certain that the 10,000 JPM employees in his region had enough space on JPM’s computer network of over 1500 computer servers to store their data.   Sarkar’s duties were critical because if there was not enough space to store data on JPM’s computers, data could be lost causing significant financial harm.  Sarkar was also responsible for devising plans to address capacity issues, including making recommendations for adding storage and allocating server space.  In addition, Sarkar oversaw JPM’s printing network for all of its computers in the Northeast.  On a more pedestrian level, Sarkar spent about six to eight percent of his time troubleshooting issues that JPM’s helpdesk and two other layers of support could not resolve.  Beyond taking immediate remedial measures to address the obstacle at hand, Sarkar would also attempt to locate the “root problem” and devise a solution that would prevent a recurrence on a global scale.

Sarkar was initially classified by JPM as exempt from the FLSA until January 1, 2008, when, as part of another review, JPM reclassified him, and hundreds of other employees, as non-exempt.  Shortly thereafter, Clarke and Sarkar initiated the instant collective action on behalf of themselves and all other similarly situated reclassified employees, who they alleged had been initially misclassified by JPM as exempt and therefore unlawfully denied overtime compensation in violation of the FLSA.  JPM moved for summary judgment, asserting, among other things, that Clarke’s claims were time-barred and that it had properly classified Clarke and Sarkar as exempt.

Turning first to Clarke, the Court agreed with JPM that his claims were barred by the FLSA’s two year statute of limitations, rejecting Clarke’s assertion that JPM’s alleged FLSA violations were willful, thereby extending the recovery period from two years to three.  As evidence of willfulness, Clarke relied solely on the fact that JPM reclassified his position in 2005.  This, the Court concluded, was insufficient, explaining that “FLSA collective action overtime suits are often prompted by a reclassification; if the mere fact of a reclassification were enough to trigger the exceptional three-year statute of limitations period, it would cease to be an exception.”

Turning to Sarkar’s claims, the Court began by setting forth the test for the computer professional exemption under the FLSA.  Specifically, the Court noted that the FLSA exempts computer systems analysts, computer programmers, software engineers or other similarly skilled workers whose primary duties include responsibility for systems analysis, computer design, support of computer programs related to machine operating systems, or skills related to the foregoing or a combination of these skills.  Looking to the legislative history of the exemption, the Court observed that Congress expanded the computer professional exemption in 1996 by eliminating the educational requirement, as well as the requirements that the employee achieve a high level of proficiency and exercise independent judgment and discretion.  The Court further noted that it was Sarkar’s primary duties, those that he did most regularly, and not his title, that was determinative of whether the exemption applied.

Against this backdrop, the Court held that Sarkar’s duties, as detailed above, fell squarely within the computer professional exemption.  In light of Sarkar’s testimony that he was a “guru” and the “go to person” for capacity management, the Court was unmoved by Sarkar’s attempt to downplay his responsibilities by asserting that he performed tasks similar to non-exempt helpdesk employees.  The Court further rejected Sarkar’s claim that the fact that JPM reclassified him as non-exempt in 2007 was evidence of prior misclassification, concluding that the “reclassification is not materially relevant to the determination of whether Sarkar falls within the computer employee exemption.”  Significantly, the evidence showed that JPM reclassified its workforce not to correct a prior mistake, but as a proactive measure adopted in light of the wave of FLSA collective actions filed nationwide.

The decision in Clarke is significant in a number of respects.  First, it reminds employers that they are free to, and should, endeavor to reclassify workers as necessary to maintain compliance with the FLSA, without fear that the mere reclassification will either extend the statute of limitations or constitute affirmative evidence of prior misclassification.  Second, the decision provides a good factual context for the application of the computer professional exemption.  Third, and lastly, the case demonstrates the quandary facing FLSA plaintiffs challenging their exempt status—on the one hand they want to portray themselves as smart and integral to the company, on the other hand the more they emphasize their skills and expertise, the more they jeopardize their misclassification claims; this is a conundrum that employers can often use to their advantage in litigation.

By: Lawrence Peikes and Jonathan Bardavid, Wiggin and Dana LLP

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