Confused About FSLA?

As an employer, you are faced with a large number of statutes, regulations and rules governing your relationships with your employees. Failure to abide by this body of rules can create significant liability for your business. Laws governing employee treatment are constantly changing and potentially dangerous new pitfalls are constantly appearing. The Fair Labor Standards Act (“FLSA”) is often a major stumbling block for employers and often leads to a lot of mistakes.

Misclassification of Employees Under the FLSA
In general, the FLSA determines employers’ obligations to pay overtime wages to employees. It requires employers to pay employees one and one-half times their hourly rate for any hours worked above 40 hours in a work week. Employers cannot average hours worked by an employee over a two week period to avoid the requirements of the FLSA. The calculation is determined on a “work week by work week” basis.

Certain exemptions to the overtime requirement exist for some employees such as those classified as “executive,” “administrative,” “learned professional,” or “creative professional” employees.

In order to be exempt, these employees must be paid on a salary basis and make at least $455 per week ($23,660.00 annually). In addition, in order to be exempt, an “executive” employee must supervise the work of two or more full-time employees and have the power to hire, fire, or promote those employees.

An exempt “administrative” employee must conduct office or non-manual work directly related to the management or general business operation of the employer’s business with the ability to exercise independent discretion and judgment as to matters of significance. A financial controller is someone who would likely fit into this category.

A “learned professional” is someone whose primary duty is performing work requiring advance knowledge in a field of science or learning such as a doctor or dentist. Finally, a “creative professional” is someone whose primary duty is performing work requiring invention, imagination, originality or talent in a recognized artistic or creative field such music, writing, or graphic arts.

Employers make mistakes when they:

1. Simply refuse to pay overtime;
2. Think that a certain employee falls within the exemptions when he or she does not; 
3. Rely on an employee’s “waiver” of rights under the FLSA.

Employees cannot “waive” their rights to overtime pay under the FLSA. Employers who, either intentionally or unintentionally, fail to pay their employees overtime will be subject to audits, fines and penalties by the United States Department of Labor.

Cash v. Cycle Craft Co.
The importance of proper classification of employees was highlighted in a recent Circuit Court case. In Cash v. Cycle Craft Co., Inc., (2007 US App. LEXIS 26808 (1st Cir. 2007)), an employee, after being terminated by his employer, brought suit claiming that he was entitled to overtime compensation which he had not been paid while working.

The employee’s job title was “New Purchase/Customer Relations Manager” for a motorcycle shop. Among other responsibilities, the employee made sure that motorcycles being sold were property “outfitted and delivered” and communicated with customers to make sure that they were satisfied with the services they were receiving. If ordered parts had not been installed on a particular motorcycle, the employee would contact the manager of the service department to fix the problem.

The employee claimed that he would often work more than 40 hours a week and thus was entitled to overtime. The employer claimed that the employee was an “administrative” employee and therefore exempt from overtime requirements.

In agreeing with the employer’s classification, the Court noted that the employee was “engaged in something more than routine selling efforts focused simply on particular sales transactions. Rather he focused on improving customer service generally by coordinating with various departments to ensure that customers were satisfied with purchase.”

Most importantly, he “exercised discretion in reacting to the unique needs” of the employer’s customers as opposed to being “a skilled worker who operated within a strict set of rules.” Accordingly, the employee was within the “administrative employee” exception to the overtime requirements of the FLSA.

Neary v. Metropolitan Property & Casualty Insurance Co.
In contrast, in Neary v. Metropolitan Property and Casualty Insurance Co., (2007 U.S. Dist. LEXIS 72524 (D. Conn. 2007)), the US District Court of Connecticut found that an insurance adjuster did not qualify for the overtime exemption. The adjuster did not exercise independent discretion in performing his job, because “he merely entered numbers into his laptop computer and the software more or less did the work of valuing the claim and deciding whether the claim was to be characterized as a total loss” and the adjuster had no authority to “negotiate and bind the company financially”. Consequently, the insurance company was required to pay the adjuster overtime wages.

Of course, Bulletproof Veil can help you better understand the FLSA, as well as help you keep all of the rules related to your business and your employees. Visit (www.bulletproofveil.com) or call (1-888-716-3180) them today1