Monday, December 22, 2008

Make a list and check it twice – FLSA exemptions

At the end of last year, I made a list of New Year’s resolutions for everyone. Number 4 on that list was, “Audit your wage and hour practices.” Morgan v. Family Dollar Stores (11th Cir. 12/16/08) provides a not-so-subtle reminder that it’s never too late to make good on this resolution.

In Morgan, the 11th Circuit affirmed the trial court’s $35,576,059.48 judgment against Family Dollar in a wage and hour collective action. The class consisted of 1,424 store managers, who claimed that Family Dollar improperly classified them as exempt and paid them a salary, while requiring 60 and 90 hours of work each week and refusing to pay overtime. According to the plaintiffs, store managers were managers in name only, and actually spend the almost all of their time performing manual labor, such as stocking shelves, running the cash registers, unloading trucks, and cleaning the parking lots, floors, and bathrooms. 

If you need any better reason why a company should not ignore these wage and hour issues, consider that the court found Family Dollar’s violation to be willful, which extended the statute of limitations (and therefore the damages) from two to three years. Family Dollar’s ignorance of it’s employees’ exemption loomed large in the willfulness finding:

Family Dollar raises several challenges to the jury’s willfulness finding. All fail. First, the evidence, detailed above, was legally sufficient to support the jury’s finding that Family Dollar’s FLSA violations were willful. For example, the Plaintiffs presented testimony from Family Dollar executives that it never studied whether the store managers were exempt executives. Executives also testified that Family Dollar’s company-wide policy was that store managers were exempt from FLSA overtime requirements, but they had no idea who made that policy.

FLSA exemptions are usually fact specific and almost always a judgment call. Because it is a subjective decision, classifications may not always be correct. However, if you have a rational basis for making the decision (such as hiring an outside professional to analyze and classify employees) and implementing a policy, you may not always win the exemption battle, but you will put your business in a much better position to avoid a finding of willfulness.

Come back tomorrow for a closer look at the executive exemption, and what factors businesses should be considering in classifying managerial employees as exempt or non-exempt.