The Fair Labor Standards
Act (FLSA) sets forth, among other things, the federal standards for basic
minimum wage and overtime pay for employees. The FLSA affects nearly all
employers, both public and private, though there are some exceptions.
The FLSA exempts some
employees from its minimum wage and/or overtime pay requirements. Whether an
employee is exempt generally depends on the employee’s job duties and
compensation arrangement. As many employers agree, however, classifying an
employee as exempt or non-exempt can be a tricky analysis. Failure to properly
classify an employee can result in a loss of the exemption. So what can an
employer acting in good faith do to protect itself in the event that an employee
is misclassified?
First, the employer may
establish a complete defense to an FLSA claim where it has had an attorney make
the exempt/non-exempt determination based on opinion letters and/or
administrator interpretations from the Wage and Hour Division of the U.S.
Department of Labor, as well as other applicable law.
Second, where the
employer has a proper, clearly communicated policy against improper pay
deductions, the employer will not lose the exemption. A clearly communicated
proper policy shall:
-
prohibit improper pay
deductions;
-
include a complaint
mechanism;
-
provide for
reimbursement of any improper pay deductions; and
-
a commitment to
comply with the FLSA requirements in the future.
29 C.F.R. § 541.603(d)
provides that:
“[T]he best evidence of a clearly
communicated policy is a written policy that was distributed to employees prior
to the improper pay deductions by, for example, providing a copy of the policy
to employees at the time of hire, publishing the policy in an employee handbook
or publishing the policy on the employer's Intranet.”
Third, if an isolated
incident occurs where an improper deduction is made from an employee’s pay, then
the employer may simply reimburse the employee upon discovery.
Should you need
assistance in properly classifying your employees to ensure compliance with the
FLSA, or in drafting a proper policy to meet the FLSA criteria above, Sacks
Tierney is here to help. You may also find guidance at the U.S. Department of
Labor's Wage and Hour Division website.
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These materials
are designed to provide general information prepared by professionals in regard
to the subject matter covered. It is provided with the understanding that the
author is not engaged in rendering legal, accounting, or other professional
service. Although prepared by professionals, these materials should not be
utilized as a substitute for professional service in specific situations. If
legal advice or other expert assistance is required, the service of a
professional should be sought.
