Research, diligence, documentation key to making good-Faith FLSA classifications

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in HR Management,Human Resources

The Fair Labor Standards Act (FLSA) governs overtime and requires employers to pay hourly employees time and a half if they work more than 40 hours per week. Exempt employees—those workers who fit into one of several white-collar and managerial classifications—don’t receive overtime pay.

But figuring out just who fits in one of the exemptions is not an easy task. Get it wrong, and you could be liable for twice the overtime you should have paid, going back two years. Get it really wrong—by failing to act in good faith—and you’ll have to pay for an additional year.

There’s a small silver lining behind that dark cloud. Employers that make a real effort to figure out which exemption applies are unlikely to be nailed for the extra year. The key is diligent research. Make sure you save any materials (U.S. Department of Labor opinion letters, guidance and newsletters, for example) that you consulted when making the exempt/nonexempt call. You can use them to show you tried to get it right.

Recent case:
Michael Pignataro and Thompson Chase worked as helicopter pilots for the Port Authority of New York and New Jersey, whose HR department had classified them as exempt professional employees. They sued, alleging they really should have been hourly employees. They claimed they were due three years of back pay.

The court concluded the pilots had been misclassified and should have been paid overtime, going back two years. But the court also said the employer hadn’t acted “willfully” when it misclassified the pilots as exempt. That’s because the authority showed the court it had researched classifications carefully and made an honest mistake. (Pignataro & Chase v. Port Authority of New York and New Jersey, No. 04-CV-1767, DC NJ, 2008)

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