Oct 11, 2007

Beyond the Collar: Misclassifying Nonexempt Employees

In a recent article entitled "Wage Wars," BusinessWeek magazine highlighted something many employers already know -- failing to pay employees for every hour worked can be expensive. According to the article, lawyers estimate that over the past few years, companies including Starbucks, IBM, and Merrill Lynch have collectively paid more than $1 billion dollars to settle wage and hour claims. The suits are as varied as the employers: workers not being paid for time spent sending work-related emails from home, arriving to the worksite a few minutes early to boot up a computer, or working extra hours to perform the same day-to-day tasks as the employees they supervise.

While the danger of violating the FLSA and state wage and hour laws may seem obvious, the assumptions we make about who is nonexempt may not be. The article highlighted this important and more subtle point--not everyone who wears a white collar is exempt from being paid overtime. Plaintiffs in these cases have included mortgage brokers, pharmaceutical reps, and stockbrokers--people who may never have even considered making such claims because they see themselves as "white collar" professionals. But as Mark Thierman, a prominent attorney representing plaintiffs in these cases, points out, it's not a matter of job title, income, or academic degree, it's a matter of job function.

So don't let your assumptions guide you. Make sure the job description matches the job's actual functions. To determine whether an employee is exempt, always compare the job's functions to the applicable FLSA exemption or your state's exemption requirements. To limit off-the-clock working time or uncontrolled overtime expenses, make sure nonexempt employees--especially those working in office environments or closely with exempt employees--understand your company's rules for working remotely, on weekends or evenings, and the like.

(And, to learn more about job descriptions and hiring, check out The Job Description Handbook, by Margie Mader-Clark (Nolo).

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