DOL crackdown … Are your employee classifications FLSA-compliant? — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
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DOL crackdown … Are your employee classifications FLSA-compliant?

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March 5, 2012 

Contact: Elizabeth Hall, Online Publisher 
(800) 543-2055  (703) 905-8000 Sheds Light on Employers’ Need to Properly Classify Employees under FLSA Exemption’s 3-Part Test

Falls Church, Va. —  Exempt vs. non-exempt: When must employers pay overtime? This is a paramount question every employer should ask as it has been brought to light recently by a lawsuit against mega-retailer Target.

According to Business Management Daily contributer David B. Ritter, Esq., “Recently, the DOL has renewed its focus on combating employee misclassification, and there’s been a rise in the number of wage-and-hour lawsuits.”

Ritter — chair of the Neal Gerber Eisenberg's Labor & Employment Practice Group in Chicago— continues, “Take the Mullins v. Target Corp. lawsuit. An employee that started working in an exempt position and was later promoted, sued the company for unpaid overtime wages under the FLSA and the Illinois Minimum Wage Law.”

The FLSA exempts those employed in a “bona fide executive, administrative, or professional capacity” from overtime pay.

According to Ritter, “There is a three-part test to determine whether an employee falls under the administrative employee exemption”:

1. “The employee must be compensated on a salary or fee ­basis at a rate of not less than $455 per week.”

2. “The employee’s primary duty must involve office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers. To meet this test, an employee must perform work directly related to assisting with the running or servicing of the business.”

3. “The employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance. The regulations specify that “the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered.”

Ritter adds, “Even though Target prevailed in this case, it serves as a cautionary tale that emphasizes the importance for employers to properly classify their employees. Employers bear the burden of proving that an employee is exempt under the FLSA.  Employers must also be prepared to justify their classifications.”

Ritter concludes, “To minimize your potential FLSA liability, it’s wise to carefully review your wage-and-hour practices and policies. Ensure employees are properly classified based on the job duties they actually perform. Failure to do so could lead to significant costs and liabilities for overtime, attorneys’ fees and penalties—in addition to the potential for a class-action lawsuit.”

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