In 2021, the Department of Labor (DOL) collected $234 million in back wages for 200,000 employees in violations under the Fair Labor Standards Act (FLSA). This area of law could be a prime practice area for the plaintiff's counsel, as the DOL is likely only scratching the surface of the problem. Many employers, eager to avoid overtime costs, misclassify employees.
What are FLSA Requirements?
As you know, all employees are either exempt or nonexempt. Those who are nonexempt must be paid a minimum wage of $7.25 per hour and are entitled to 1 1/2 of their hourly wage (or time and a half) for work beyond 40 hours. Wage and hour violations can arise in many different situations. For example, if a minimum wage employee has deductions from pay for a voluntary benefit but the employer never sends the money to the vendor of the benefit (which results in the employee not having the benefit), then DOL makes clear this is a wage and hour violation.
A recent article published on JD Supra titled “FLSA Misclassification: Common Mistakes That Employers Make When Classifying Their Employees as ‘Exempt' from Overtime Requirements” sheds more light on this problem. The writers of the article, Karel Mazanec and Jennifer Prozinski of Venable LLP serve businesses and are obviously available to provide counseling advice on the proper classification of employees.
However, many businesses shun legal advice to save money, and as a result, thousands of employees may not be paid properly under the law. Thus, why plaintiff's counsel should be vigilant in spotting these cases.
Here are the mistakes categorized in this article:
1. Classifying all “salaried” employees as exempt.
For the sake of convenience, many employees are provided a salary for 40 hours of work; however, that does not mean that the occupation itself is exempt. Employees who are required to work an extra 30 minutes or an hour over on a regular basis or perhaps work through lunch on a regular basis may have a significant claim if, for example, their occupation is clerical.
2. Making classification determinations based on position titles.
Just because someone holds the title of manager does not mean that they are part of management. The actual job duties must be examined.
3. Assuming all “administrative” positions qualify for the Administrative Exemption.
This exemption is related to the prior item but is separately noted in the article. One of the tests for this exemption is the exercise of discretion and independent judgment regarding significant matters. Establishing operating policies and guidelines are examples of some of the duties that fit that exemption.
4. Assuming all supervisors qualify for the Executive Exemption.
One of the tests for this exemption is to regularly direct the work of two other full-time employees or their equivalent along with the duties of hiring and firing.
5. Assuming all employees who work with computers qualify for the Computer Employee Exemption.
This exemption has more to do with evaluating the technical and software requirements for businesses as opposed to simply using a computer throughout the entire workday. The article notes that even an employee who provides technical services for the business, such as fixing computers or providing help to employees with software issues, does not meet this exemption either.
6. Relying on incidental or occasional duties in making classification determinations.
Leaving a secretarial position in charge of the office for a short time every now and then does not change the status of that employee to exempt. The duties involved must be primary duties.
7. Failing to consider state law.
This can be a bigger problem in some states as compared to others. The Alabama Department of Labor under Ala. Code § 25-2-2(1) has the power “to administer all labor laws and all laws relating to the relationship between employer and employee, including laws relating to hours of work, and working conditions in places of employment.” This department also has the right to compile statistics and information as well as make recommended changes to the law.
The damages under FLSA include the unpaid wages but also liquidated damages such as damages for emotional distress and punitive damages if there is retaliation as well as civil penalties. Additionally, attorney fees “shall” be awarded for the prevailing plaintiff (29 U.S.C. §216(b)). It appears that there are several employers who compete unfairly, by not following these rules. This results in harm to the employee as well as to other businesses that are following the rules. For these reasons, it may be worth adding this area to your practice.