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
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