Rely on Interviews, Not Job Descriptions, for FLSA Audits

Allen Smith, J.D. By Allen Smith, J.D. June 12, 2018
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​Dissatisfaction among workers who believe they've been misclassified as exempt from overtime may prompt an employer to conduct a Fair Labor Standards Act (FLSA) audit to determine whether the employees are performing exempt-level duties.

Audits should have the appropriate scope, find out what workers' duties really are through interviews with employees rather than relying on job descriptions, and result in changes to classifications or job duties, experts say.

Exempt-Level Duties

Employees must perform certain roles to be exempt under the so-called white-collar exemptions:

  • They must meet the required salary-level test of $23,660 on a salary basis that is not subject to reduction even if the quality or quantity of work varies.
  • For the executive exemption, employees must have a primary duty of managing the enterprise or a department or subdivision of the enterprise, must customarily and regularly direct the work of at least two employees, and must have the authority to hire or fire, or their suggestions and recommendations as to the hiring, firing or changing the status of other employees must be given particular weight.
  • For the administrative exemption, employees must have a primary duty of performing office or nonmanual work directly related to the management or general business operations of the employer or the employer's customers, and their primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.
  • For a professional exemption, employees must have a primary duty of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by prolonged, specialized, intellectual instruction and study, or must specialize in a few other similarly, highly specialized fields, such as teaching, computer analytics and engineering.

Scale of Audit

Before conducting an FLSA audit, employers need to determine whether the review will be companywide or just for select jobs that it's concerned might not really be exempt.

Next, the employer needs to decide who to interview.

Don't interview all the employees in the position, said Adam Boland, an attorney with Clark Hill in San Antonio. Instead, the employer should have a good sample size—such as 15 percent or 20 percent of employees in that position—and interview individuals in that position at multiple sites in different geographic areas.

Jonathan Siegel, an attorney with Jackson Lewis in Irvine, Calif., recommended interviewing the managers of the positions that are being reviewed.

HR's Role

Boland said HR professionals who understand the ins and outs of overtime exemptions can conduct FLSA audits, then ask for attorneys' analysis of whether certain positions that the audit identified as possibly being misclassified should be nonexempt.

Kevin Sullivan, an attorney with Epstein, Becker & Green in Los Angeles, recommended instead that an attorney prepare scripted questions for HR to ask and supervise the audit at the attorney's direction so the answers are protected by the attorney-client privilege.

HR professionals should conduct the interviews not only because that's less expensive than having attorneys do them, but also because HR has a better institutional knowledge about the positions than lawyers and knows what those in the positions should be doing, Boland said. HR also can set employees at ease that the interviews won't get anyone in trouble but are to ensure the company is paying them correctly, he noted.

"A list of prepared questions is crucial to be sure that each element of the exemption is thoroughly covered during the interview," said Steven Suflas, an attorney with Ballard Spahr in Cherry Hill, N.J., and Denver. "Just asking someone what they do without matching it to the ultimate question at hand—the FLSA exemptions—is a waste of time."

[SHRM members-only toolkit: Determining Overtime Eligibility in the United States]

The interviewer should check on the extent to which nonexempt duties are performed. Track the position through a typical workday, which may reveal elements of the exemption. Find out if there are any variations in a job based on monthly, quarterly or seasonal fluctuations, Siegel recommended.

The administrative exemption is the most challenging white-collar exemption to apply, said Alfred Robinson Jr., an attorney with Ogletree Deakins in Washington, D.C. In trying to assess whether an employee exercises the requisite independent judgment to qualify for the exemption, it's important to ask about:

  • The decisions an employee makes.
  • A worker's level of authority to manage business operations.
  • An employee's assignments.
  • A worker's authority to represent or bind the employer.

Counsel's oversight of an audit requires more than coordination for the attorney-client privilege to apply, Robinson cautioned. "The attorney should provide direction, oversight and counsel, as well as retain the documents and information gathered as part of an audit," he stated.

Follow-Up

An employer should not conduct an audit of exempt employees' classifications unless it is committed to acting upon the results of the audit, Robinson said. Decisions that need to be made in response to an FLSA audit typically include whether to:

  • Reclassify certain positions without modifications to the duties.
  • Change the duties of certain positions such that reclassification is unnecessary.
  • Provide back pay to reclassified individuals.

The employer also must consider whether it's at risk of employees bringing a class action, Sullivan observed.

If there are many employees in a position that appears to have been misclassified as exempt, employers typically will reclassify the workers as nonexempt, Boland said. But if there are only a few employees in a position, and it's a close call whether they should be exempt, there's less risk in not reclassifying them, he noted.

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