Wage and Hour Violations: FLSA Exemptions/Misclassification

Every job is classified one of two ways – exempt or non-exempt. That classification determines whether or not your are subject to the FLSA’s (Fair Labor Standards Act) requirement of receiving overtime. But, how can you tell if your job has been misclassified?

FLSA Exemptions/Misclassification

Many employers misclassify their employees as exempt from FLSA guidelines when, in fact, they are non-exemptemployees according to the law. Employees who are misclassified as exempt often fall into one of three commonly misapplied categories: executive, administrative or independent contractors.

Employers will typically classify an employee as an executive or as an administrative employee when their job dutieswouldn’t place them in that category. For example, in order to qualify for an executive or administrative exemption, you need to work a certain percentage of your time performing those specific duties than an executive or an administrative would work – and if you typically don’t spend 50 percent of your time performing those duties, then the employer is not entitled to exempt you from the FLSA.

Further, to qualify for the executive exemption, you need to supervise two or more employees, your primary duty has to be management related and you have to have input into hiring and firing. The administrative exemption is similar in that you need to be using independent judgment and working directly with management.

Misclassifying Employees as Independent Contractors

One of the most common misclassification issues concerns independent contractors. There are five factors that are most commonly considered in this evaluation:

1. the degree of control exercised by the employer over the employee
2. the worker’s opportunity for profit or loss and their investment in the business
3. the degree of skill and independent initiative required to perform the work
4. the permanence or duration of the working relationship
5. the extent to which the work is an integral part of the employer’s business

Typically what happens is that employees are labeled or given job titles such as assistant manager or supervisor when, in fact, these assistant managers – or even managers and supervisors – are performing the same duties as those that they’re supervising for more than 50 percent of their day. That is a typical way that employers try to avoid paying overtime to these types of workers.

The same thing happens with respect to independent contractors. In fact, you see it all the time in construction work, janitorial work, cable TV installation and similar areas where workers are classified as independent contractors, but they really don’t have any degree of independence. They’re really employees who don’t have control or the right to control the work that’s being done. However, employers often classify them as independent contractors so that they can avoid the standards that are outlined under the FLSA and avoid paying overtime wages to these types of employees.

This goes for computer programmers as well. Typically these types of IT employees are not exempt from the FLSA because they don’t have the required degree or experience or the required exercise of discretion or judgment to qualify them as exempt.

Being a Manager Doesn’t Always Mean You’re Exempt

Wage and hour lawyers say that it’s an easy out for an employer to classify an employee as a “manager” and avoid paying overtime under the FLSA. It dupes the employee in the majority of instances into thinking that they’re not entitled to these overtime wages and it’s a common practice for these companies to give these job titles in order to save money.

Each FLSA misclassification situation needs to be evaluated individually – and while there are certainly guidelines and case law that provide information as to the merits of a particular classification, it is far from science. That’s why it’s important to seek the counsel of an experienced wage and hour attorney who not only understands the FLSA, but also your state law equivalents.

Case Studies: Wage and Hour Violations – FLSA Exemptions/Misclassification

Case Study 1: Misclassified Administrative Employee

A company classified an employee as an administrative employee to avoid paying overtime wages. However, upon closer examination, it was revealed that the employee did not meet the criteria for the administrative exemption. The employee did not exercise independent judgment or work directly with management as required by the FLSA. As a result, the misclassification led to a violation of the employee’s rights under the FLSA.

Case Study 2: Independent Contractor Misclassification

A construction company classified its workers as independent contractors to avoid complying with FLSA standards and paying overtime wages. Despite being labeled as independent contractors, these workers did not have control over their work or the right to control it, indicating an employee-employer relationship rather than an independent contractor arrangement.

This misclassification resulted in the company unlawfully depriving the workers of their entitlement to overtime pay.

Case Study 3: Manager Misclassification

An employer classified an employee as a “manager” to circumvent paying overtime under the FLSA. However, upon further investigation, it was discovered that the employee did not meet the criteria for the executive exemption.

The employee did not supervise two or more employees, and their primary duties did not involve management responsibilities or input into hiring and firing decisions. This misclassification allowed the employer to avoid paying the employee rightful overtime wages.