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. A Dramatic Question
“To be [exempt] or not to be [exempt], that is
the question [for HR Managers].”
[With apologies to] William Shakespeare

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. FLSA History
• Enacted in 1938
• Can be tough to apply to
modern work practices
– Telecommuting
– Flexible hours
– Use of smartphones outside
work

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. 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. WHD Getting More Aggressive
• 350 more
investigators since
2009
• 13,500 more
investigations since
2009

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

13. 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

15. 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

17. 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

18. 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

19. Jobs that May Qualify*
 Plant manager
 Department supervisor
 Store manager
 Construction project
superintendent
*Depending on facts—job title
alone insufficient to establish
status

20. Jobs that Typically Don’t Qualify*
 Working foreman
 Relief supervisor
 Store “manager” who spends only
small part of time on exempt work

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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

32. 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

33. Jobs that Typically Don’t Qualify*
• Inspector
• Examiner/grader
• Comparison shopper
• Personnel clerk
• Mortgage loan officers

34. 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

35. 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

36. 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

37. 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

38. Jobs that Typically Don’t Qualify*
• Licensed practical nurse
• Nurse aide
• Paramedic
• Paralegal, legal assistant
• Engineering technician
• Accounting clerk, bookkeeper
• Cook

39. 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

40. Jobs
Typically Qualify* Typically Don’t*
• Musician, composer, • Beat reporter
conductor, soloist
• Novelist, play writer
• Writer for ad agency
• Actor
• Painter, photographer
• Investigative news reporter

41. 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

42. Jobs
Typically Qualify* Typically Don’t*
• Computer systems analyst • Entry level
• Most computer programmers
programmers • Computer
manufacture and
repair
• CAD operators
• Help desk workers

43. 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

44. 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

45. 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

46. Questions/Comments?
David Dubberly
803-253-8281
ddubberly@nexsenpruet.com