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USING THE FLSA AMENDMENT IMPLEMENTATION PERIOD TO AUDIT ALL USES OF EXEMPTIONS

By Craig Salner posted 09-27-2016 15:11

  

USING THE FLSA AMENDMENT IMPLEMENTATION PERIOD TO

AUDIT ALL USES OF EXEMPTIONS

 Craig Salner, Esq.

Clarke Silverglate, P.A.

Chair of FLSA Subcommittee, DRI Employment and Labor Committee

 

            As the calendar approaches October, we are now well more than halfway through the 6+ month “implementation period” between the Department of Labor’s May 18 announcement of regulatory amendments to the Fair Labor Standards Act (“FLSA”) and the December 1 “effective date.”  As we may recall, we initially anticipated a 60-day window for our clients to adjust to the changes.  Instead, we were provided over six months.  What can we do with this gift of extra time.

             One step I have recommended to clients is to audit all uses of exemptions in their pay practices, not just those involving employees who will no longer qualify under the Salary Level test.  Why?  3 main reasons:

             1)         The Blood is Back in the Water

             Employer-side labor and employment lawyers are all too familiar with the statistics on FLSA cases, the most common type of case in our federal courts.  The FLSA has become an attorney-driven litigation phenomenon.  It has no administrative remedy requirement and if an employee pursues an FLSA claim and prevails by as much as $1, they are entitled to all reasonable attorney’s fees.  What this should translate to is an expectation that the plaintiffs’ bar will immediately pounce on employers who fail to timely adjust to the new regulations.  Attorneys on the scene will equate to FLSA suits on issues stretching beyond the scope of the new regulations.

             2)         Timing

             To the extent an employer discovers that an exemption practice is either incorrect or too questionable to retain (questionable =’s a lawsuit; a lawsuit =’s a loss!), converting the employee from exempt to non-exempt can be tricky.  The employee can and should inevitably ask “Why?”   If at all possible, the employer wants to avoid having to say, “We believe we have been paying you incorrectly for the last ____ years/months.” 

             The DOL’s changes afford companies the ability to couch classification changes more tactfully:

             Compare the following:

           a) “The U.S. Department of Labor has recently clarified the scope of exemptions pursuant to the Fair Labor Standards Act. In response to these federal mandates, some of you will need to be reclassified to stay in compliance with federal law.”

           b) “We will need to re-classify you to non-exempt because it turns out we were mistaken in how we treated you in the past.

             Neither of these is a guaranteed way to avoid a wage complaint.  Choice one, however, gives the employer a fighting chance.  Reviewing all exemptions now provides employers this opportunity.

             3)         Extreme Downside of Misclassification

             Experienced wage and hour practitioners know that most FLSA claims are relatively low stakes in the grand scheme of litigation.  Indeed, the plaintiff’s attorney’s fee award often dwarfs the damages of an employee who worked 2-3 times off the clock.  Some errors, however, present much larger downside.  The two that spring to mind are exemption misclassifications and botched tip credits.  Misapplied exemptions could affect hundreds or thousands of employees in the same job classification and subject an employer to paying overtime for three years or more (depending on the state), typically with employees whose time is not being kept because they are being treated as exempt.  You know how this goes.  The employee can virtually pick a number of overtime hours worked out of a hat and the employer, with all presumptions tilted against it, next has the burden to disprove these claims.

            My rule of thumb with exemptions – treat it like contradicting your parents at the dinner table.  If you’re going to do it, make sure you’re right!

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10-19-2016 10:00

Excellent and useful perspective, Craig.  Thanks very much for posting this.