The Rising Tide of Overtime Litigation: Don’t Get Caught Up in an Overtime Lawsuit
Rate this Column: (2.0 Stars | 3 Votes)
|class action lawsuits | overtime litigation | retailers | administration | employees | HR | Walmart | hourly employees | Devora Lindeman | job titles | executives | U.S. Department of Labor | salespeople | overtime lawsuit | federal overtime laws | state overtime laws | overtime pay | laws for overtime | Employment Law|
We’ve all seen the headlines about the half-billion dollars that Walmart recently agreed to pay to settle many of the class action wage and hour lawsuits against it. When we think of overtime claims, we tend to think of retailers such as Walmart, or sweatshops with employees working at or close to minimum wage. Many fail to realize that overtime claims are also the curse of white collar employers. Merrill Lynch, Morgan Stanley, UBS and virtually all of the players in big pharma (Abbott Laboratories, AstraZeneca, and Eli Lilly, to name a few) have something in common with Walmart–they are all either facing large scale class-action overtime lawsuits or have recently paid out eight- or nine-figure settlements in overtime cases. And small to mid-size employers are not exempt from similar fates.
Salaried Employees May Be Entitled to Overtime Pay
When should an employee receive overtime pay? Everyone thinks they know the answer—hourly employees get overtime pay, those paid on a salary do not get overtime pay, right? Unfortunately, it is not quite that simple.
Federal laws for overtime and state laws for overtime identify which employees should receive overtime pay—and it is not an “hourly” or “salaried” distinction. Employers might be shocked to learn that according to laws for overtime, many salaried employees are entitled to overtime pay. The employee’s job duties and responsibilities govern that determination, not how they are paid.
Which Employees are Exempt From the Overtime Pay Requirements?
The major exemptions from overtime pay requirements apply to:
- Certain administrative employees
- Outside Salespeople
Generally, executives run the organization, or a major division of it. They hire and fire people, assign work and manage the business. Administrators use independent judgment and discretion to make important decisions affecting the business. They do not necessarily supervise others, but serve in key administrative roles such as Marketing Manager or HR Director. Professionals have advanced degrees (doctors, dentists, CPAs, lawyers, etc.), or serve in creative roles (artist, musician, actor, etc.)–but the U.S. Department of Labor is very specific about exactly which professionals qualify for this exemption from overtime pay. Outside Salespeople primarily spend their time away from the office calling on clients. The outside sales exemption applies exclusively to real road warriors–inside salespersons usually do not qualify.
To maintain these exemptions, employees (except outside salespersons and some professionals) generally must also be paid on a salary basis (rather than hourly or otherwise) and must receive at least $455.00 per week (or another weekly amount as required by applicable state law). Exempt salaried employees need to be paid their full weekly salary for every week in which they perform work, with very limited exceptions. Improper deductions from the wages of exempt employees can void overtime exemptions.
If an employee does not fall into one of these (or a limited number of other) specialized exemptions, federal overtime law requires the employee to be paid time and one-half for all hours worked in excess of 40 in a single workweek. Additional state overtime regulations may apply–e.g., California requires overtime pay after eight hours in a single workday.
Beware the “Account Executive”
Impressive job titles may make employees feel good (Walmart has 88,000 “Associates”), but titles alone have no impact on overtime pay exemption status. Many companies run into trouble with workers engaged in the sale of goods or services. Providing telemarketers with a fancy job title and limited training does not turn them into exempt executives, administrators or outside salespersons who are exempt from overtime pay. As noted above, some of America’s largest companies–with large human resources departments–have guessed wrong when it came to overtime exemptions relating to sales.
Overtime Pay Reality Check
It is not just big companies that get hit with overtime lawsuits–and wage claims are generally not covered by EPLI. So even though you may find yourself under pressure to support management’s fantasy about how state and federal overtime law works, remember that an expensive overtime lawsuit is probably not in line with the company’s strategic plan. Check the state and federal laws, and get help from employment counsel to clarify and support exemption classifications for overtime pay.
First published on Human Resources IQ.
U.S. Employers Now Need to Worry About “Caregiver Discrimination”?
At-Will Employment—How Does It Apply to your Business Today?
Arrests and Convictions and HR: Would You Hire Jean ValJean?
Healthy Workplace Bill: Are We Ready to Legislate Civility?
HR's Role in Protecting Company and Employee Confidential Information
Going the Extra Step
Creating Your Own Talent Pool—Legal Issues for Employee Training
What HR Needs to Know
Dealing with Performance Issues for Disabled Employees
There’s No Such Thing As A Free Lunch, or a “Free” Employee: Pitfalls of Utilizing Interns and Volunteers
* = required.
16th Annual HR Shared Services & Outsourcing Summit
Omni Orlando Resort, ChampionsGate, FL
October 14- 17, 2014
Shared Services & Outsourcing Week China 2014
Grand Hyatt Shanghai, Shanghai, China
October 20- 23, 2014
Corporate Learning Week
Buena Vista Palace Hotel & Spa, Lake Buena Vista, FL
November 11- 14, 2014
Smart Process Applications: A Game Changer for HR Shared Services
March 28, 2013
The Evolution of Reference-Checking into a Strategic Hiring Solution
December 12, 2012
Management Training and Legal Implications
Your company implemented an employee handbook to tighten legal protections. While a good first step, with... Read more
A Workforce Capable to Grow With GE
Outsourced Team Members Want Careers, Too Why Outsource the Human Resources Function? There are many reasons... Read more
How to Change the Game
How do you gain competitive advantage in the war for talent? Is it through new software, a larger human... Read more
Dr. Jac Fitz-enz