Wage and Hour

Employee Misclassification Litigation Is on the Rise

, The Legal Intelligencer


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On Jan. 10, conditional certification was granted to a nationwide collective action of some 1,750 human resources employees employed by Lowe's. The workers' allegation? That they were misclassified by the home improvement chain as "exempt" under the Fair Labor Standards Act (FLSA), and thus not paid overtime for hours worked more than 40 in a workweek. The workers claimed that although they were titled as "managers," such nomenclature was inaccurate as their daily work consisted mostly of administrative and clerical duties, as opposed to managerial functions such as employee supervision, hiring and firing.

The collective action in the Lowe's case is indicative of a growing trend confronting employers across the United States: employee misclassification litigation.

Exempt versus NonExempt and the FLSA

The classification of employees as exempt or nonexempt is one of the defining features of the FLSA. In most instances, in order to be classified as exempt, employees must be paid at least $455 a week on a salaried basis, and with limited exceptions, such salary cannot be subject to deduction. Employees who are correctly classified as exempt are not entitled to overtime pay.

The FLSA provides categories of exempt workers and the U.S. Department of Labor regulations provide general parameters for analyzing exempt status, noting that "job titles do not determine exempt status," and that "in order for an exemption to apply, an employee's specific job duties and salary must meet all the requirements of the department's regulations."

Some of the categories of exempt jobs are as follows (note that each has specific parameters applied to it, including hours, salary, duties and other tests):

• Executive, administrative, professional, computer and outside sales employees.

• Seasonal amusement or recreational workers.

• Agricultural employees.

• Casual babysitters and persons employed as companions to the elderly or infirmed.

Unfortunately, many of the general standards and definitions of the various exemptions have proven difficult to apply in practice, and increasingly so as the American workforce has continued to evolve. When the FLSA was enacted in 1938, workers were more easily defined and classified. In an economy that was heavily manufacturing-based, most employers could look to the duties workers performed on a day-to-day basis and more easily determine what classification they fit into—for example, a worker assembling products on a line was nonexempt; in contrast, the workers whose primary duties were overseeing those on the assembly line were exempt. But for years the U.S. economy has been transitioning from manufacturing-based to one that is heavily service-based. Instead of assembly line workers and machinists, U.S. jobs are now weighted toward customer service, accountants and administrative professionals who perform a variety of duties. However, the tests created to determine who is exempt in a 1938 U.S. economy are difficult to apply to our modern workforce.

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