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Are You Sure Your Employees are Exempt from Overtime? Would You Stake a Million Dollars on it?

Determining whether an employee is exempt from minimum wage and overtime under the Fair Labor Standards Act (“FLSA”) and similar state laws can be a very difficult task and mistakes can be extremely costly.  Such mistakes can be more costly than other legal missteps because an employer is likely to carry the decision through to all similarly situated employees and future employees.

This may be what happened to First Republic Bank’s employees in five states, including Connecticut and New York.  The U.S. Department of Labor recently recovered more than $1 million in back overtime pay for 392 employees.  These employees were found to be misclassified as exempt under the FLSA’s administrative and professional exemptions.  While information has not been released regarding how the employees were misclassified, it is likely the employer did not make 392 separate errors.  Rather, it may have incorrectly determined that “assistant managers” are exempt and applied that determination to dozens of employees.  With the complexity of these laws, the high likelihood that a single error will be replicated for multiple employees, and the increasing scrutiny of federal agencies and plaintiffs’ lawyers with respect to wage-and-hour issues, employers need to be on high alert when classifying employees as exempt – perhaps more than with any other employment issue.

We recommend employers undertake an internal “Wage and Hour Audit” each year to review company practices for compliance.  This is one area where working with someone experienced in the field is critical.  Since many costly employment law cases start from innocent errors, this can be a cost-effective way to avoid major headaches in the future.

Brody and Associates regularly advises management on complying with state and federal employment laws including wage-and-hour laws.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.