hourglass-small copy.jpgThis blog post was authored by Meredith Karasch

If you think your agency has classified exempt employees correctly, you may want to take a second look.  Last month, we reported on the Department of Labor (“DOL”) audit that resulted in an award of $544,715 in back wages against the San Francisco Giants.  Part of that award was because the Giants classified employees as exempt from overtime laws when they were not exempt.

All public agencies are subject to the Fair Labor Standards Act (“FLSA”), which regulates payment of minimum wage and overtime to employees.  Under the FLSA, there are employees who are exempt from overtime.  These include what is referred to as the “white collar exemptions” – executive, administrative and professional employees.  To qualify for an exemption, the employee must be paid a salary and receive a minimum of $455 per week.  The test does not end there, however.  The employee must also meet the “primary duties test” for their particular exemption.  This means the primary duty of the employee must be executive, administrative or professional. The DOL warns that “In order for an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the Department’s regulations.”  It is also important to know that job titles and job descriptions do not determine whether an employee is exempt.  It is not easy to determine whether an employee may qualify as exempt and it requires an analysis of the employee‘s actual job responsibilities.

The proper classification of employees is important because the FLSA demands that a non-exempt employee must earn overtime after working 40 hours per week.  The DOL has jurisdiction to enforce the FLSA and can investigate claims that employers are violating the law.  Such investigations can end with the DOL awarding back pay, other damages, and fines to employers.  The DOL can even file lawsuits against employers who fail to pay overtime correctly.  Awards can be enormous, depending on the violation and the amount of employees involved.  For example, the DOL has reported the following cases on its website for 2013:

  • A settlement in federal court ordering an automotive detailer to pay $292,000 in back wages and liquidated damages and $34,408 in penalties for violations including failure to classify employees correctly and overtime violations to 205 employees.
  • Kryger Glass Co. agreed to pay more than $107,000 in back wages following a DOL investigation that found the company had misclassified 53 delivery drivers as exempt from overtime requirements.
  • A sportswear company agreed to pay more than $97,000 in back wages to 133 employees after the DOL found overtime and record-keeping provisions because the company improperly classified inside sales representatives as exempt from overtime requirements.   

These settlements underscore the importance of classifying employees correctly.  Conducting an exemption analysis will help your agency to determine if it is properly classifying exempt employees as exempt from overtime.  Utilization of a position survey such as this can help you to ensure that your exemption determinations are accurate.