October 2014

Employers commonly know that exempt status means that an employee does not have to be paid overtime for hours worked over forty in a workweek. Determining whether an employee is exempt, however, can often be problematic. Simply providing an employee with an official sounding job title and giving him/her duties the employer deems important is not enough. Rather, there are a number of things to look at when deciding if an employee qualifies as exempt and even the most well-meaning employers can inadvertently misclassify an employee. This was the case in a recent Minnesota federal court decision, Grace v. NSP, Civ. No. 12-2590 (D. Minn. Sept. 16, 2014).

In this case, the employee was given the title of Supervisor and was “primarily responsible for compiling service work orders and assigning them to work crews to be completed.” As a result of her job duties, (and the fact that she was paid a guaranteed salary above and beyond the minimum amount required by law) the employer classified her as an exempt employee under the Fair Labor Standards Act’s (FLSA) administrative exemption. Obviously the employee disagreed and sued NSP for failure to pay her overtime, and the court agreed with her.

On the surface it appeared that the employee’s job duties fit within the overtime exemption. However, the court delved deeper into the employee’s day to day activities to determine, among other things, what the employee’s “primary duties” were; whether they were “directly related to the management or general business operations of the employer or the employer’s customer”; and whether those duties involved “the exercise of discretion and independent judgment with respect to matters of significance.”

Why is this important? Because the burden is on the employer to prove an employee’s job meets all the requirements to consider the employee exempt. Confusion is commonplace because like the employee’s job duties in this matter, many of the FLSA’s exemption requirements are not well defined and are subject to debate. It is this uncertainty that causes employers to unknowingly rack up exposure to overtime hours for employees they believe to be exempt, opening up the potential for class action wage and hour litigation. Adding to the uncertainty, President Obama instructed the U.S. Department of Labor (DOL) to revise the FLSA’s overtime exemption requirements, which it has not yet done.

What can be done? Employers should audit each exempt position by clearly understanding that position’s job duties, the amount of time spent performing those duties and how those duties relate the employer’s specific business. For assistance with determining whether your employees are properly classified contact Wessels Sherman’s Minneapolis office.