Columbia SHRM presents …FLSA: Exempt or Not Exempt,    That is the Question                  April 19, 2012               ...
A Dramatic Question“To be [exempt] or not to be [exempt], that isthe question [for HR Managers].”[With apologies to] Willi...
Overview• FLSA review and enforcement trends• “White collar” exemptions   –   Executive employees   –   Administrative emp...
FLSA History• Enacted in 1938• Can be tough to apply to  modern work practices  – Telecommuting  – Flexible hours  – Use o...
Main Provisions• Minimum wage• Overtime pay  – Exemptions—mostly for “white collar” employees     • Focus of most FLSA lit...
Enforcement• WHD   – Investigations   – Lawsuits       • Injunctive relief       • Back wages and liquidated damages• Priv...
WHD Getting More Aggressive• 350 more  investigators since  2009• 13,500 more  investigations since  2009
WHD Getting More Aggressive• DOL-ABA “Bridge to Justice” referral program• DOL “apps” for smart phones     – Timesheet app...
WHD Getting More Agressive• Investigation information on internet at  http://ogesdw.dol.gov  – MSHA, OSHA, EBSA, OFCCP, an...
Private Lawsuits Continue to Increase• 2011 FLSA suits in federal court = 7,000• Approx. 200 class actions• In 10 years, 3...
Executive Employees• Pay: salary basis at least $455/week ($23,600/year)• Management: primary duty is management of  busin...
Executive Employees• Supervision: customarily and regularly  supervises work of two or more other  employees in department...
Jobs that May Qualify* Plant manager Department supervisor Store manager Construction project  superintendent*Dependin...
Jobs that Typically Don’t Qualify* Working foreman Relief supervisor Store “manager” who spends only  small part of tim...
Case Study: Gooden v. Dolgencorp Inc. and            Thomas v. Dolgencorp Inc.• Decided Apr. 3, 2012 by federal court in S...
Case Study: Gooden v. Dolgencorp Inc. and          Thomas v. Dolgencorp Inc.• Spent over 50% of time on these managerial d...
Salary Basis• No reduction in pay for variations in quality or  quantity of work  – Can reduce paid sick or personal leave...
Permitted Deductions• Absence for one or more full day for personal  reasons other than sickness or disability• Absence fo...
Permitted Deductions• Penalties imposed in good faith for violating safety  rules of major significance• Unpaid disciplina...
Safe Harbor Policy• Exemption not lost over salary basis if:  – Clearly communicated policy prohibiting    improper deduct...
Business Owners• Own at least a “bona fide” 20% equity interest  in business where works• Actively engaged in management o...
Highly Compensated Employees• Pay: total annual compensation of at least  $100,000/year  – At least $455/week paid on sala...
Highly Compensated Employees• Duties: customarily and regularly performs at  least one exempt duty of an EAP employee  – P...
Administrative Employees• Pay: salary or fee basis at least $455/week  ($23,600/year)• Duties: primary duty is   – Perform...
Administrative Employees• Discretion: primary duty includes  exercise of discretion and independent  judgment with respect...
Jobs that May Qualify*• Insurance claims adjuster• Certain financial industry  employees• Team leader for major  projects•...
Jobs that Typically Don’t Qualify*•   Inspector•   Examiner/grader•   Comparison shopper•   Personnel clerk•   Mortgage lo...
Case Study: Foster v. Nationwide Mutual                 Insurance Co.• Decided Jan. 5, 2012 by federal court in OH• 91 “sp...
Case Study: Foster v. Nationwide Mutual                  Insurance Co.• Involved exercise of discretion and independent  j...
Learned Professional Employees• Pay: salary or fee basis (some professionals exempt  from this) at least $455/week ($23,60...
Jobs that Typically Qualify*• Medical doctor, osteopathic   •   Lawyer  physician, podiatrist,        •   Engineer  dentis...
Jobs that Typically Don’t Qualify*  • Licensed practical nurse  • Nurse aide  • Paramedic  • Paralegal, legal assistant  •...
Creative Professional Employees• Pay: salary or fee basis (film industry  employees exempt from this) at least  $455/week ...
JobsTypically Qualify*               Typically Don’t*• Musician, composer,            • Beat reporter  conductor, soloist•...
Computer Employees        (Other than those qualifying for EAP exemptions)• Pay  – At least $27.63/hour for every hour wor...
JobsTypically Qualify*         Typically Don’t*• Computer systems analyst • Entry level• Most computer              progra...
Outside Sales Employees• Pay: no requirement on basis or amount• Duties: primary duty must be making sales or  obtaining o...
Jobs that Typically Qualify*• Most sales reps   • Pharma sales rep case heard by U.S.     Supreme Court on Apr. 16, 2012 (...
Common Errors to Avoid• Assuming all employees paid salary are  exempt• Improperly applying exemption• Making improper ded...
Questions/Comments?      David Dubberly       803-253-8281ddubberly@nexsenpruet.com
FLSA: Exempt or Not Exempt, That is the Question
FLSA: Exempt or Not Exempt, That is the Question
FLSA: Exempt or Not Exempt, That is the Question
FLSA: Exempt or Not Exempt, That is the Question
FLSA: Exempt or Not Exempt, That is the Question
FLSA: Exempt or Not Exempt, That is the Question
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FLSA: Exempt or Not Exempt, That is the Question

  1. 1. Columbia SHRM presents …FLSA: Exempt or Not Exempt, That is the Question April 19, 2012 David Dubberly Certified Specialist in Employment and Labor Law
  2. 2. A Dramatic Question“To be [exempt] or not to be [exempt], that isthe question [for HR Managers].”[With apologies to] William Shakespeare
  3. 3. Overview• FLSA review and enforcement trends• “White collar” exemptions – Executive employees – Administrative employees – Professional employees – Computer employees – Outside sales employees• Salary basis rule and safe harbor – Business owners – Highly compensated employees
  4. 4. FLSA History• Enacted in 1938• Can be tough to apply to modern work practices – Telecommuting – Flexible hours – Use of smartphones outside work
  5. 5. Main Provisions• Minimum wage• Overtime pay – Exemptions—mostly for “white collar” employees • Focus of most FLSA litigation • Regulations updated 2004• Youth employment• Recordkeeping
  6. 6. Enforcement• WHD – Investigations – Lawsuits • Injunctive relief • Back wages and liquidated damages• Private Lawsuits – Back wages, liquidated damages, attorney’s fees, and costs – Collective actions• DOJ – Criminal prosecution and civil money penalties
  7. 7. WHD Getting More Aggressive• 350 more investigators since 2009• 13,500 more investigations since 2009
  8. 8. WHD Getting More Aggressive• DOL-ABA “Bridge to Justice” referral program• DOL “apps” for smart phones – Timesheet app » Can provide evidence for FLSA lawsuit » But time recorded on app may be inaccurate – Eat Shop Sleep app » DOL: “Access hotel/motel, restaurant and retail industry enforcement data and easily identify violators” – iCitizen Labor Report app » Adds OSHA data
  9. 9. WHD Getting More Agressive• Investigation information on internet at http://ogesdw.dol.gov – MSHA, OSHA, EBSA, OFCCP, and WHD – On WHD: • Employer names and addresses • Back wage amount • Employees due back wages • Penalties
  10. 10. Private Lawsuits Continue to Increase• 2011 FLSA suits in federal court = 7,000• Approx. 200 class actions• In 10 years, 300% increase in FLSA suits v. 1% increase in all suits• Frequent complaints:  Misclassifying employees as exempt  Improper deductions from exempt employees’ salaries
  11. 11. Executive Employees• Pay: salary basis at least $455/week ($23,600/year)• Management: primary duty is management of business or customarily recognized department or subdivision – Setting and adjusting employee pay and hours – Maintaining production or sales records – Evaluating employee performance – Handling employee complaints and grievances
  12. 12. Executive Employees• Supervision: customarily and regularly supervises work of two or more other employees in department• Authority: hires or fires other employees – Or recommendations as to hiring, firing, or other status changes given particular weight
  13. 13. Jobs that May Qualify* Plant manager Department supervisor Store manager Construction project superintendent*Depending on facts—job titlealone insufficient to establishstatus
  14. 14. Jobs that Typically Don’t Qualify* Working foreman Relief supervisor Store “manager” who spends only small part of time on exempt work
  15. 15. Case Study: Gooden v. Dolgencorp Inc. and Thomas v. Dolgencorp Inc.• Decided Apr. 3, 2012 by federal court in SC• Two DG store managers covered by executive exemption• Primary duties were managerial – Hiring, supervising, and disciplining employees – Promoting, demoting, and firing employees – Providing training and setting and adjusting work schedules – Delegating and prioritizing tasks and assignments
  16. 16. Case Study: Gooden v. Dolgencorp Inc. and Thomas v. Dolgencorp Inc.• Spent over 50% of time on these managerial duties• These duties important to ensure success of stores• Mostly exercised discretion in performing these duties – Not overly limited by district managers or SOP• Paid more than nonexempt employees – And could earn bonuses based on store profitability
  17. 17. Salary Basis• No reduction in pay for variations in quality or quantity of work – Can reduce paid sick or personal leave time• Pay of full salary for any week in which any work performed, regardless of number of days or hours worked – Don’t have to pay for any week in which no work performed
  18. 18. Permitted Deductions• Absence for one or more full day for personal reasons other than sickness or disability• Absence for one or more full days for sickness or disability if employee is covered under sick leave policy• Offset equal to amount received for jury fees, witness fees, or military pay
  19. 19. Permitted Deductions• Penalties imposed in good faith for violating safety rules of major significance• Unpaid disciplinary suspension of one or more full days imposed in good faith for violation of written workplace conduct rules• Partial workweek during first or last week of work• Unpaid FMLA leave
  20. 20. Safe Harbor Policy• Exemption not lost over salary basis if: – Clearly communicated policy prohibiting improper deductions with complaint mechanism – Reimburse employees for improper deductions – Good faith commitment to comply• Not available if employer willfully violates policy by continuing to make improper deductions after complaints
  21. 21. Business Owners• Own at least a “bona fide” 20% equity interest in business where works• Actively engaged in management of business• Salary level and salary basis requirements don’t apply• No duties test
  22. 22. Highly Compensated Employees• Pay: total annual compensation of at least $100,000/year – At least $455/week paid on salary basis – Including commissions, non-discretionary bonuses, and other non-discretionary compensation – Excluding cost of benefits
  23. 23. Highly Compensated Employees• Duties: customarily and regularly performs at least one exempt duty of an EAP employee – Primary duty includes performing office or non- manual work
  24. 24. Administrative Employees• Pay: salary or fee basis at least $455/week ($23,600/year)• Duties: primary duty is – Performance of office or non-manual work – Directly related to management or general operations of employer or employer’s customers
  25. 25. Administrative Employees• Discretion: primary duty includes exercise of discretion and independent judgment with respect to matters of significance – Exercise of discretion and independent judgment = comparing and evaluating possible courses of conduct, and acting or making decision after various possibilities considered
  26. 26. Jobs that May Qualify*• Insurance claims adjuster• Certain financial industry employees• Team leader for major projects• Administrative assistant to senior executive• HR manager• Purchasing agent
  27. 27. Jobs that Typically Don’t Qualify*• Inspector• Examiner/grader• Comparison shopper• Personnel clerk• Mortgage loan officers
  28. 28. Case Study: Foster v. Nationwide Mutual Insurance Co.• Decided Jan. 5, 2012 by federal court in OH• 91 “special investigators” administratively exempt• Primary duty was conducting investigations to resolve indicators of fraud in suspicious claims – Interviewed witnesses – Gathered information – Recommended and sometimes supervised vendors
  29. 29. Case Study: Foster v. Nationwide Mutual Insurance Co.• Involved exercise of discretion and independent judgment – Used “experience and knowledge … to distinguish relevant from irrelevant, fact from untruth, to resolve competing versions of events” – Had “nearly unilateral discretion” in referring cases with unresolved fraud indicators to law enforcement• Related to matters of significance – Helped determine if claims paid or not
  30. 30. Learned Professional Employees• Pay: salary or fee basis (some professionals exempt from this) at least $455/week ($23,600/year)• Duties: primary duty is performance of work requiring advanced knowledge – Work must be predominantly intellectual and require consistent exercise of discretion and judgment – Advanced knowledge must be in field of science or learning customarily acquired by prolonged course of specialized intellectual instruction
  31. 31. Jobs that Typically Qualify*• Medical doctor, osteopathic • Lawyer physician, podiatrist, • Engineer dentist, optometrist • Teacher• Registered nurse • Accountant• Certified medical • Executive chef, sous chef technologist • Certified athletic trainer• Dental hygienist• Certified physician assistant• Pharmacist
  32. 32. Jobs that Typically Don’t Qualify* • Licensed practical nurse • Nurse aide • Paramedic • Paralegal, legal assistant • Engineering technician • Accounting clerk, bookkeeper • Cook
  33. 33. Creative Professional Employees• Pay: salary or fee basis (film industry employees exempt from this) at least $455/week ($23,600/year)• Duties: primary duty is performance of work requiring invention, imagination, originality, or talent in recognized field of artistic or creative endeavor
  34. 34. JobsTypically Qualify* Typically Don’t*• Musician, composer, • Beat reporter conductor, soloist• Novelist, play writer• Writer for ad agency• Actor• Painter, photographer• Investigative news reporter
  35. 35. Computer Employees (Other than those qualifying for EAP exemptions)• Pay – At least $27.63/hour for every hour worked, including overtime, or – Salary or fee basis at least $455/week ($23,600/year)• Duties – Apply systems analysis techniques, – Design, document, analyze, create, or modify computer systems or programs, or – Modify computer programs
  36. 36. JobsTypically Qualify* Typically Don’t*• Computer systems analyst • Entry level• Most computer programmers programmers • Computer manufacture and repair • CAD operators • Help desk workers
  37. 37. Outside Sales Employees• Pay: no requirement on basis or amount• Duties: primary duty must be making sales or obtaining orders or contracts for services or use of facilities, and• Location: customarily and regularly engaged away from employer’s place of business
  38. 38. Jobs that Typically Qualify*• Most sales reps • Pharma sales rep case heard by U.S. Supreme Court on Apr. 16, 2012 (Christopher v. SmithKlineBeecham Corp. d/b/a GlaxoSmithKline)• Some real estate agents
  39. 39. Common Errors to Avoid• Assuming all employees paid salary are exempt• Improperly applying exemption• Making improper deductions from salary• Job descriptions and employee handbook not up to date
  40. 40. Questions/Comments? David Dubberly 803-253-8281ddubberly@nexsenpruet.com

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