Exempt vs. non-exempt – no relative matter under FLSA law

by on April 2, 2009 · 0 Comment POSTED IN: HR Info Center

Bagel restaurant misclassified assistant managers under FLSA law

Just because an employee has an upscale job title – “manager” or “assistant manager,” for example – don’t assume she’s exempt under FLSA law. Asking the wrong questions about status in exempt vs. non-exempt matter may cost you lead you to dispense back pay that wasn’t in the payroll budget.

That’s what happened at Colorado-based Einstein Brothers Bagels. Based on a tip, the Dept. of Labor’s Wage and Hour Division launched an investigation of Einstein locations in the Denver area earlier this year. The investigators found that the company’s assistant managers were nothing more than glorified food servers. After the investigation, the company agreed to pay $495,930 in back overtime wages to 424 assistant managers in 27 states.

As part of the settlement, Einstein agreed to comply with the law in the future. And it also agreed to perform a nationwide self-audit of exempt vs. non-exempt status.

The audit determined that Einstein’s non-exempt managers were working an average of 50 to 51 hours per week. Shortly after the audit, the company began paying these employees on an hourly basis.

How did the misclassification happen? Einstein confused the title with the task – a common mistake in exempt vs. non-exempt questions. Under FLSA law, an executive exception is granted when managing is the employee’s primary duty. In the service industry that means no more than 40% of an employee’s time may be spent doing non-management tasks.

It didn’t take a genius to see that these employees were spending too much time servicing customers and too little time training employees and making decisions – and getting a salary that’s commensurate with the title.

Source: U.S. Department of Labor

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