Misclassifying Your Employees As Exempt For Purposes of Overtime Can Have Devastating Consequences
Review Our Self-Audit Form to Determine if Your Company May be at Risk
Many employers mistakingly believe that if their employee is paid a salary and has a “high level” sounding job title, the employee is exempt from overtime requirements. What some employers do not appreciate is that job titles are not important. Instead, in addition to being paid on a salary basis, the employee must also perform job duties that meet the standards for one of six exempt categories established by the United States Department of Labor and the Fair Labor Standards Act (”FLSA”).
If an employer makes the mistake of misclassifying its employees, it can cost the company hundreds of thousands of dollars, or more. For example, IBM agreed to pay $65 million to settle a class action lawsuit accusing the company of misclassifying employees as exempt from overtime. Likewise, the office supply chain Staples recently agreed to pay $42 million to settle several class action lawsuits related to the alleged misclassification of its assistant store managers.
The large financial risk is due in part to the fact that, unless the employer can prove its misclassification was done in good faith, employers are required to pay double damages – an amount for unpaid overtime wages plus an equal amount for liquidated damages – in addition to other damages. Additionally, the employee is entitled to two years of unpaid back overtime wages (or three years if the employer’s violation of the FLSA was willful).
Therefore, in addition to educating themselves about the FLSA’s job classification requirements, it is very important for employers to audit their employee classifications to ensure their exempt employees are truly exempt and not entitled to overtime. To review our Self-Audit Form to determine your company’s compliance with the FLSA’s exemption rules, please click here.
For more information about the FLSA exemptions, please contact David Furgason at dfurgason@duffordbrown.com, Larry Stone at lstone@duffordbrown.com, or Christian Hammond at chammond@duffordbrown.com, or call 303.861.8013.
