Knowing which employees are exempt is a question worth asking. If you need further justification, consider the $234 million in back wages for nearly 200,000 employees collected by the U.S. Department of Labor (DOL) last year. Just how 200,000 employees were not paid in accordance with the Fair Labor Standards Act (FLSA) was detailed in lexology.com, an online blog.
FLSA is the primary federal statute responsible for governing the classification of employees for the purpose of overtime. State and local jurisdictions may have their own laws governing employee classifications.
Non-exempt employee – Entitled to the federal minimum wage and overtime pay at one and one-half times the employee’s regular rate of pay for all hours worked beyond 40 hours in a workweek.
Exempt employee – Doesn’t receive overtime pay or qualify for overtime pay (executive exemption, administrative exemption, professional exemption, computer employee exemption, outside sales exemption, or other exemption)
Costly Mistakes
While often thought of as a straight-forward issue, there are more than 6,000 lawsuits alleging violations of FLSA filed each year. The misclassification is more common than many might think and can benefit from the input of experienced employment counsel.
- Don’t classify all salaried employees as exempt. Exempt employees must be paid a predetermined amount of compensation that doesn’t change based on quality/quantity of work performed. The salary must be at least $684 per week. Employees must meet a specified job duty test for the criteria and the salary test for the exemption to apply.
- Titles must reflect an employee’s actual day-to-day duties and responsibilities. The primary duties of an employee must satisfy one of the applicable duties tests.
- Not all administrative positions fall under the Administrative Exemption. The Administrative Exemption requires the primary duty of the position to be office or non-manual work related to the general business/management of the employer or the customers of the employer. One element often overlooked involves the employee exercising discretion and independent judgement. This includes the authority to formulate, affect, interpret or implement management or operating policies.
- The Executive Exemption includes duties of managing the business or a customarily recognized department of a subdivision of the business. Not all managers and supervisors regularly direct the work of at least two or more full-time employees or their equivalent. These managers also must have the authority to make hiring and firing decisions.
- Just because an employee works with computers does not necessarily qualify them for the Computer Employee Exemption. A combination of criteria is important to determine if an employee qualifies. Help desk technicians generally do not qualify for this exemption.
- Because many jobs are a combination of exempt and non-exempt duties, it’s important to know if the duties are the primary, or most important duty, an employee performs. Other responsibilities cannot preclude the primary responsibilities of an employee’s work.
Seeking Damages
Employees have the right to file suit to recover unpaid wages, including overtime. In some cases, this also includes a “liquidated damages” provision. This allows employees to recover twice their actual back wages. Treble damages, a recovery of three times the amount of actual financial losses, is also permitted in some cases. Companies found out of compliance could also be more likely to face an audit from the DOL or state agency.