New to HR? Templates, tools and development to make you a seasoned pro in no time.
Shawn Premer shows how doing the right thing for employees leads to positive business results.
Is your employee handbook keeping up with the changing world of work? With SHRM's Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Build competencies, establish credibility and advance your career—while earning PDCs—at SHRM Seminars in 12 cities across the U.S. this spring.
#SHRM18 will expand your perspective – on your organization, on your career, and on the way you approach HR. Join us in Chicago June 17-20, 2018
Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.
Department of Labor (DOL) opinion letters sometimes tip off HR professionals that some of their employees have been misclassified under the Fair Labor Standards Act (FLSA) before employees recognize the mistake. Going to the DOL for help may seem like turning yourself in. But it often is employers’ best option, according to Lee Schreter, an attorney with Littler Mendelson in Atlanta, in a Feb. 9 interview with HR News.
One of the most troublesome areas of the FLSA classifications is the administrative exemption. The administrative exemption remains “the most difficult for employees and employers to understand and try to apply,” Schreter said. Litigation under this as well as all of the FLSA exemptions “really is on the rise.”
Recent administrative exemption opinions
Litigation over the administration exemption has mushroomed in the financial services industry, particularly over whether brokers and financial advisors fit within the exemption, said George Voegele Jr., an attorney with Cozen O’Connor in Philadelphia. He told HR News that there has been much litigation over which high-ranking fire and police department positions meet either the administrative or executive exemption.
The DOL most recently clarified who fits within the administrative exemption in two opinion letters issued on Jan. 10, determining that:
• A copy editor and senior copy editor did not fit within the administrative exemption (FLSA 2006-45, dated Dec. 21, 2006).
• Location managers in the film industry did (FLSA 2006-46, dated Dec. 21, 2006).
Just because an employee does not fit within one exemption doesn’t mean that person necessarily is nonexempt. The exemptions are not mutually exclusive, Schreter noted. So, if a senior copy editor supervises two or more employees, he or she might fit within the executive exemption.
Schreter said the two recent opinion letters didn’t surprise her, but she was startled by a DOL opinion letter ( FLSA 2006-42, dated Oct. 26, 2006, and issued Nov. 21, 2006), determining that help-desk workers did not fit within the administrative or computer professional exemption. Schreter said that she was “very disappointed” by this conclusion, saying it took “far too narrow” a view of the exemption.
Opinion letters aren’t the final word on exemptions, but courts do afford them deference. “They are a very strong guide as to what the DOL believes the law should be,” Voegele observed. Sometimes courts contradict opinion letters though, which is why checking with an attorney before reclassifying is prudent, he added, to “make sure you’re on the right track.”
When an opinion letter is a true barometer of an FLSA misclassification, an employer has several options. These may vary depending on whether just one or hundreds of employees would be affected, Schreter observed.
Doing nothing is the worst option, she cautioned, because inaction may line an employer up for a willful violation of the law and lead to an award of liquidated damages.
Another option, which Schreter dubs the “Hail, Mary approach,” is to reclassify the position and pray that the employee will not sue before the three-year statute of limitation for claims of willful violation under the FLSA has run. The statute of limitations is longer under some state wage and hour laws, such as in California, where it is four years, she noted.
Or the employer can reclassify the position and issue back wages to cover what is owed. Schreter said she knows some employers have done this with success, and often “employees view this as the right thing to do.”
But she’s also seen some employers pay back wages and then, as though waking up with a hangover, face FLSA claims from workers “who have the audacity to sue you” despite the payments and the signing of releases. The employers are “stunned that the releases do not work,” and the costs of ensuing litigation can become “a real nightmare.”
The best option, according to Schreter, often is “to go to the DOL and say, ‘we saw the opinion letter and think we misclassified and would like to fix it and would like your supervision in doing so.’ ” Schreter cautioned that “I don’t pretend to speak for the DOL,” but said that the agency is receptive to this type of arrangement.
One advantage of DOL supervision of the payments for back pay is that then a release will be effective under the FLSA, she remarked.
“The real benefit to employers not only is getting the release, but the real psychological advantage of being able to say, ‘We found the issue and went to who can help, which is the DOL,’” Schreter added. Employers have found this approach has “meant a great deal to employees,” who believe the employer did the right thing, and, as a result, are less likely to sue under state law.
Allen Smith, J.D., is SHRM’s manager of workplace law content.
IT support specialists are not exempt, DOL states, HR News, Jan. 9, 2007.
Step by Step, HR Magazine, February 2005.
White-Collar Wrinkles, HR Magazine, December 2004.
For the latest HR-related business and government news, go daily to www.shrm.org/hrnews.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Please sign in as a SHRM member before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
Talent Attraction Study: What Matters to the Modern Candidate
SHRM Member Discounts Program
SHRM’s HR Vendor Directory contains over 3,200 companies