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![A Dramatic Question
“To be [exempt] or not to be [exempt], that is
the question [for HR Managers].”
[With apologies to] William Shakespeare](https://image.slidesharecdn.com/columbiashrm-flsa-tobeexemptornot-120420115718-phpapp01/75/FLSA-Exempt-or-Not-Exempt-That-is-the-Question-2-2048.jpg)
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FLSA: Exempt or Not Exempt, That is the Question
This summary discusses the key points from a presentation on exemptions under the Fair Labor Standards Act (FLSA). The presentation covered: - Trends in FLSA enforcement by the Department of Labor including more investigations. - The exemptions for executive, administrative, professional, computer, and sales employees and the salary and duties tests for each. - Common mistakes made by employers around misclassifying employees and improper salary deductions. - Recent court cases related to applying the exemptions.
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FLSA: Exempt or Not Exempt, That is the Question
- 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 “Tobe [exempt] or not to be [exempt], that is the question [for HR Managers].” [With apologies to] William Shakespeare
- 3. Overview • FLSA reviewand 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 • Enactedin 1938 • Can be tough to apply to modern work practices – Telecommuting – Flexible hours – Use of smartphones outside work
- 5. Main Provisions • Minimumwage • 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 MoreAggressive • 350 more investigators since 2009 • 13,500 more investigations since 2009
- 8. WHD Getting MoreAggressive • 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 MoreAgressive • 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 Continueto 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 MayQualify* Plant manager Department supervisor Store manager Construction project superintendent *Depending on facts—job title alone insufficient to establish status
- 20. Jobs that TypicallyDon’t Qualify* Working foreman Relief supervisor Store “manager” who spends only small part of time on exempt work
- 21. Case Study: Goodenv. 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: Goodenv. 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 • Noreduction 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 • Absencefor 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 • Penaltiesimposed 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 • Ownat 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 MayQualify* • Insurance claims adjuster • Certain financial industry employees • Team leader for major projects • Administrative assistant to senior executive • HR manager • Purchasing agent
- 33. Jobs that TypicallyDon’t Qualify* • Inspector • Examiner/grader • Comparison shopper • Personnel clerk • Mortgage loan officers
- 34. Case Study: Fosterv. 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: Fosterv. 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 TypicallyQualify* • 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 TypicallyDon’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 TypicallyQualify* • 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 toAvoid • 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