Magazine article Workforce

Avoiding Overtime Lawsuits

Magazine article Workforce

Avoiding Overtime Lawsuits

Article excerpt


Big companies are paying out big bucks for misclassifying non-exempt employees. Here are some basic steps to keep your company from being the next defendant.

There's a very clear message echoing through the American workplace: categorizing employees as exempt or non-exempt is no longer just a prickly payroll decision. Misclassifying employees as exempt from overtime pay when they are entitled to it is to risk being slapped with a huge lawsuit. In the past year, a number of class-action complaints have been filed by employees accusing companies of cheating them out of overtime pay.

In recent well-publicized cases, Rite Aid, U-Haul, and Taco Bell have been charged with overtime violations, settling for $25 million, $7.5 million, and $13 million, respectively. In July 2001, a jury ruled that Farmers Insurance Exchange owed $90 million for not correctly paying its 2,400 claims adjusters and examiners. The presiding judge in the case reasoned that the insurance adjusters were the equivalent of production workers.

Also last year, Starbucks Coffee Co. was accused of overtime violations. The company, which prides itself on its corporate citizenry, denies wrongdoing.

To avoid costly lawsuits, it is imperative that businesses understand what "exempt" truly means.

Section 13(a)(1) of the FLSA exempts executive, administrative, professional, and outside sales employees from the FLSA's overtime requirements-- as long as they meet certain tests regarding job duties.

Here are the categories and their requirements, according to the Department of Labor:

Executive Exemption

* These employees have management as their primary duty.

* They direct the work of two or more full-time employees.

* They have the authority to hire and fire, or to make recommendations affecting the employment of others.

* They regularly exercise a high degree of independent judgment in their work. …

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