Added on 06/30/2016 by kalsonlaw
You may have been hearing a lot of buzz about changes to the Wage & Hour law and specifically overtime exemption rules. The rule changes will be effective as of December 1, 2016. Wage and Hour is already a big issue today even though most employees and employers are unaware of overtime regulations. There have been numerous class action suits against big companies where the courts or the Department of Labor have determined that employees are not really managers and therefore entitled to overtime. It doesn’t matter what the employer calls the employee. Rather, the test is whether the employees specific duties meet one of the exemptions under the Wage & Hour statutes.
The burden of proof is clearly on the employer to establish that an employee is exempt from overtime. The employer is required to go through a series of tests set forth in the Fair Labor Standards Act (FLSA) guidelines in order to determine whether an employee is truly exempt. An employee is not exempt simply because he or she is being paid a salary rather than being compensated at an hourly rate. An employee is not exempt simply because management thinks of the person as a “manager” or “indispensable to the business”. It doesn’t matter if the employee agreed to be exempt as a condition of employment.
Rather, there are specific and detailed criteria which limit the employees to whom the exemptions may be applied. In November of 2011, a Plaintiff’s lawyer won $11.5 million in fees in a Staples overtime class action lawsuit. The attorney’s helped the Staples Managers receive a $42 million settlement in the class action lawsuit as the employees were not exempt from overtime.
Similarly, in November 2004, an $8.3 million class action settlement was reached against Dollar General concerning unpaid overtime. In that lawsuit the discount retailer failed to properly pay Store Managers for overtime in violation of the Fair Labor Standards Act (FLSA). In the Dollar General case, Store Managers were required to work as much as 90 hours per week and not paid overtime. They generally spent less than 10 hours a week performing managerial duties. The rest of the time the Store Managers performed non-managerial tasks such as operating cash registers, loading and unloading stock, or stocking shelves.
I recently had a case where a client who worked for a car dealership worked in excess of 60 hours per week and was not paid overtime. She was not an executive, administrative or professional employee as required by the FLSA. She did not manage any employees or have the ability to hire or fire employees. She did not exercise discretion or independent judgment. She processed warranty claims pursuant to a set standard/process. She did not have an advanced degree. In that case, the employer unilaterally changed the employee’s compensation from salary plus commission to salary only because they thought she was “making too much money”. They told her she was lucky to have a job. After her salary was changed, numerous additional duties were added to her workload and her hours of work dramatically increased. She was not paid any additional money. I was successful in getting a monetary settlement for her.
Most employees are unaware of their rights under the Wage and Hour laws. They accept the directive from their employer that they are exempt from overtime just because they are called salaried. Many employees are afraid to question their pay or status due to fear of losing their job. It is unlawful to retaliate against an employee who files a complaint with Wage and Hour or pursues a claim with a private attorney questioning whether they are properly exempt from overtime and seeking compensation.
Sometimes I do counsel small employers. On a National level, the rule change is estimated to cost employers a quarter of a billion dollars per year. The rules require every employer to conduct a thorough review of all their employees exempt status, update all overtime policies and track process for time and attendance. The employer must notify employees of the changes taking place and adjust payroll systems to accommodate the new procedures. Violations of the FLSA will not be tolerated. Employers that do not comply with the new overtime regulations, will be subject to substantial penalties including lawsuits, criminal charges, fines and more.
At a minimum, employers need to determine which of their employees are designated as exempt. In many cases, employers are not currently tracking the weekly hours of these workers and that process should change. Employers should also know which of their exempt workers are typically working more than 40 hours per week since those individuals could become eligible for overtime under the new law.
Certain employees are and will continue to remain exempt under Wage & Hour law. In 2012, Nurses were held exempt under the New Jersey Wage & Hour law. In my profession, Paralegals were determined not to be exempt and required to be paid overtime. Of course attorneys are exempt from overtime and we can work endless hours without being compensated overtime. Just a reminder the overtime standard is if you work over 40 hours per week not 80 hours over a two week pay period. The law also requires employees to be paid at time and a half for any hours worked in excess of 40 hours per week.
Recently, I had one small employer tell an employee that she was not entitled to overtime because he was a “small employer”. He improperly paid her only straight time for her hours worked in excess of 40 hours per week. The money owed to her was substantial. There is only a two year statute of limitations or look-back under the Wage & Hour law. There may be a three year look-back under the Federal law if the employer was found to have willfully violated the Wage & Hour laws. What this meant for my client, unfortunately, is that she could not be compensated at time and a half for all of the overtime that she worked for this small employer. We were only able to go back two years or at the best three years if it was found that the employer willfully violated the Wage & Hour law. Of course, the case settled when the small employer finally contacted an attorney as most cases do. I expect that Wage & Hour claims will continue to rise and be at the forefront of employment lawsuits. At the current time, at least 30% of all civil lawsuits filed involve employment related matters. Wage & Hour laws are not the only area where employees are mis-classified. In my next blog I will address mis-classification of employees as independent contractors. Till we meet again.