All it takes is one disgruntled employee who thinks, "Maybe I should have been paid for all of those lunches that I worked through..."

Unfortunately, some employers pay little or no attention to the importance of correctly classifying employees as either exempt or non-exempt under the Fair Labor Standards Act (FLSA). This can cause significant ramifications, as this classification drives numerous aspects that affect the treatment of an employee, primarily whether he or she would qualify for overtime pay. This can be a very costly mistake. The increase in Department of Labor (DOL) investigations and wrongful termination lawsuits of late, coupled with the sizeable financial implications associated with such actions, strongly declare that (FLSA) compliance does matter. In this increasingly litigious climate, employers simply cannot afford to risk ignoring the FLSA regulations.

What should employers do to protect themselves?

It is critical for employers to understand the FLSA regulations. The definitions of what makes a position exempt or non-exempt under the FLSA may be tedious and lengthy, but it is imperative that employers educate and train both human resources professionals and line management on the criteria utilized to properly classify a position. An individual in an exempt position simply means that he or she is "exempt" from certain provisions of the FLSA. In order to identify the correct classification of a specific position, several tests must be performed. The first test to determine FLSA exemption is the Salary Basis Test. Generally, this means that an employee is paid at least $455 per week. The next test for exemption considers whether the employee performs a job which is considered to qualify under one of the specified exempt designations. These designations include the Executive, Administrative, Professional/Creative, Computer Professional or Outside Sales Person designation. The FLSA promulgates very specific criteria that must be examined under each of these exempt designations. It is imperative that these guidelines be used in order to truly identify a position's correct classification. If a position does not meet the requirements under any of these exempt classifications, it would then be deemed as non-exempt. While regulations vary somewhat by state, generally, all non-exempt employees must be paid for ALL hours worked, and must receive overtime pay (for hours worked in excess of forty per week). A non-exempt employee must also be provided regular meal breaks and receive premium pay for holidays. This does not mean, however, that exempt employees are not also protected by the FLSA. Because an exempt employee earns an established salary, regardless of the number of hours he or she is required to work, it is unlawful to dock his or her pay without authorization. Many employers unknowingly make this violation on a regular basis. A common example of this is when a company docks the pay of an exempt individual if he or she uses excess sick days While an employer may stipulate a certain number of days allowed for absence due to illness, barring a designated unpaid family or medical leave, it cannot dock a person's pay if he or she exceeds it.

There can be numerous financial and operational ramifications if an employer violates the FLSA. To avoid this, employers should perform a periodic review of each position to ensure ongoing compliance. Companies should pay particular attention to roles that may have changed due to restructuring or downsizing, or employees who perform low-level supervisory roles. In addition, positions that have inflated titles are often misclassified. There are many gray areas, which make designating a position as exempt or non-exempt difficult. A detailed analysis of the duties and responsibilities of each position, utilizing the FLSA guidelines, is the only way to ensure appropriate FLSA classification.

Ignoring or disregarding the significance of compliance with the FLSA can have severe and long lasting ramifications. Employers must recognize that, in this case, class does matter. For more information, or to talk about how we can help your organization comply with the FLSA, please contact us.