Fixing misclassification? Pay the right amount

Sometimes, it becomes clear that an employee has been misclassified as exempt when she should really be an hourly employee.

Employers that want to fix the situation can do so and avoid a lawsuit by offering the employee double her lost overtime pay, plus interest going back either two or three years depending on how the mistake happened. (If the misclassification was willful, three years’ worth of interest are due.)

Recent case: Semmantha Chie worked for Reed Elsevier when she was promoted to coordinator of publishing operations. She was informed that the position was exempt.

Five years later, HR informed Chie that she had been classified incorrectly and was owed overtime. Chie then estimated the hours she had worked in excess of 40 per week. The company wrote her a check for $43,000, which it said represented four years’ worth of unpaid overtime.

Chie refused the check and instead sued.

Her employer asked for the case to be dismissed because the check represented four years’ worth of overtime, far longer than the statute of limitations.

The court disagreed. It said the check would have to represent ­payment for three years of overtime, but doubled because the FLSA calls for double damages. Plus, interest would also be due. To forestall a lawsuit, the offered check would have to represent everything the employee would get in a lawsuit. (Chie v. Reed Elsevier, No. C-11-1784, ND CA, 2011)

Final note: Consult your attorney if you think an em­­­ployee was misclassified and is due unpaid overtime. He or she can best determine if the misclassification was willful and payment should go back three years, or merely a mistake worth payment going back two years. This is not a do-it-yourself project.