Training customers how to use business software doesn’t count as exempt work

A highly compensated employee whose job duties consisted largely of training customers on how to use the software his employer sells has won a California overtime lawsuit.

The case shows that employers that are complacent about classifying employees as exempt may pay a big price. Now that new federal overtime rules are soon to go into effect, it’s a good time to review how you classify employees and fix any mistakes you may have made.

Recent case: Jeremy worked for a company that sells software to track invoices, rebates and charge-backs to clients in the life sciences and technology industry. He was the principal technical trainer for the company and earned about $100,000 per year.

Jeremy’s responsibilities included developing, preparing and delivering training to customers and employees. In order to provide effective hands-on experiences, he used simulations of multi-computer systems that he built from previously developed virtual environments, as well as conventional training materials.

His work involved updating the training materials to correct inaccuracies and add practice exercises, as well as rebuilding virtual environments with each new software release and tweaking aspects of the training materials and virtual environments to account for how different customers used the software.

These modifications occurred both in advance and on the fly, during training delivery. Although some changes involved simply identifying which pre-made training modules to use based on a given client’s software configuration, he had a great deal of leeway in how he arranged or modified the training materials.

Jeremy also took on additional responsibilities, such as designing an instructor’s manual for other trainers. He created an online knowledge database and developed a style guide to help others with their training material development.

His employer classified him as an exempt administrative employee and didn’t pay overtime if he worked more than eight hours a day or 40 hours a week.

After he lost his job, he sued, alleging misclassification.

The employer argued Jeremy was properly classified because he had great leeway in how he developed the training materials and because the job involved “the performance of office or nonmanual work directly related to management policies or general business operations of his/her employer or his employer’s customers.”

The court said he wasn’t properly classified. It reasoned that he wasn’t involved in development of software—the company’s product—only training clients how to use that software.

That, according to the court, was not directly related to management policies or the general business operations of either the employer or the customer.

It ordered the employer to pay for all overtime Jeremy had worked. (Gordon v. Model N, No. 15-01423, ND CA, 2016)

Final note: Employees often don’t raise misclassification until they lose their jobs and use that as an excuse to sue. Prevent such litigation by correctly classifying everyone from the start.

Beware job responsibility creep, too. For example, some employers have added job duties instead of hiring more employees. This may mean that someone you once properly classified as exempt may now do so much nonexempt work that he or she is now improperly classified.