A simple test to evaluate exempt employees status

by on March 30, 2009 · 0 Comment POSTED IN: HR Info Center

Are you violating FLSA overtime standards?

If your organization employs exempt employees who perform tasks other than managing other people and making decisions, you should conduct an FLSA exemption test to make sure you see eye-to-eye with the DOL about whether these managers are actually exempt.

Here’s a case that illustrates a common mistake that employers make. And it suggests a way for other companies to minimize their risk of losing an Fair Labor Standards Act (FLSA) lawsuit where workers are misclassified as exempt employees.

Called “manager” under FLSA overtime guidelines

Ivan Krieg worked as a store manager for a regional shoe-repair chain. Krieg’s primary responsibilities involved stocking shelves, repairing shoes, cutting keys and waiting on customers.

Krieg operated the store by himself. He worked approximately 45 hours a week and received a weekly salary of $475.

Two hourly employees – non-managers – also worked single shifts at the store, each on a part-time basis. Although each associate worked less than 40 hours a week, their job duties were the same as Krieg’s.

After three years of employment, Krieg was discharged by his supervisor.

Not long after his discharge, Krieg filed a FLSA overtime lawsuit against his former employer claiming that he’d been misclassified as a manager and was owed back pay for the overtime he’d worked over the years.

He didn’t hire or make decisions like exempt employees

A court agreed with Krieg and ordered his former employer to pay him more than $12,000 in back pay, plus additional fines and court costs.
Although the employer argued that Krieg was solely responsible for the store’s operations, it couldn’t show that his job involved any actual decision-making: He didn’t hire or direct employees; nor did he purchase supplies or participate in the company’s strategic-planning initiatives. Each of which are vital to defining exempt employee status.

Create an informal group

When issuing rulings on possible FLSA overtime violations, courts look less to the law than to the street: If the average person were to consider what Krieg did, would he conclude that the majority of this job, say 60% of his time, was involved decision-making and directing other employees?

If the average person says “yes”, a judge will probably say “yes” too.

Here’s a simple reality check you can use to gauge whether your organization could be at risk for FLSA compliance violation:

  • Copy the job description in question on a separate sheet of paper. Omit all references to the job title
  • Make sure the job description is thorough and that it adequately reflects what the individual does on a day-to-day basis.
  • Show the job description to a couple of friends and answer any questions they have about the job and about the difference between non-exempt versus exempt employees – without mentioning the job title.

If your test group says the position doesn’t sound like management exempt employees, chances are a judge won’t either.

Cite: Krieg v. Pell’s, Inc., U.S. District Court, Southern District of IN, No. IP 00-1230-C-T/K, 1/28/02.

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