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Regularly review FLSA exempt/nonexempt status

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in HR Management,Management Training

Perhaps nothing strikes more fear in an HR manager’s heart than learning that employees have filed a class-action wage-and-hour lawsuit alleging they were improperly classified as exempt employees.

The reason is obvious: If the employees win the lawsuit, they stand to collect tens of thousands—perhaps millions—of dollars in back wages for overtime for themselves and all similarly situated employees.

Your best defense is to be proactive about pay issues. Conduct regular reviews to make sure positions throughout your organization are properly classified as hourly or salaried. That’s necessary because job duties change all the time.

The employers that fare best in court are those that stay on top of exempt/nonexempt classifications under the Fair Labor Standards Act (FLSA).

Recent case: Oswald Cruz sued his employer, Lawson Software, on behalf of himself and all other workers that the company had labeled “consultants.” He argued they should have been classified as nonexempt, and therefore were due back pay plus penalties.

But the company called on its compensation manager, who explained to the court that when she started her job, everyone with the title “consultant” was classified as exempt. Still, she conducted yearly assessments to see if that determination was correct. She looked at each consultant position, as well as the actual jobs each performed. She interviewed a cross-section of 15 consultants about their jobs before concluding that they were properly classified.

The court independently examined each position, too, using Lawson Software’s earlier assessments as its guide. The court was convinced the company took its classification responsibility seriously.

It denied Cruz’s bid for class-action certification and dismissed the case. (Cruz, et al., v. Lawson Software, et al., No. 08-5900, DC MN, 2011)

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