Tuesday, August 5, 2014

LinkedIn’s $6M FLSA settlement provides a good lesson to employers (updated)

LinkedIn will pay nearly $6 million in back pay and liquidated damages to 359 current and former employees following a Department of Labor investigation, reports the DOL.

The employees, reports Business Insider, are commissioned inside salespeople. Typically, inside salespeople are not exempt under the FLSA, and must be paid overtime for all hours worked over 40. If an employee is paid a straight commission, you would, on a weekly basis, divide the commissions paid that week by the total numbers of hours worked to arrive at the hourly rate for that week. You would then multiply that hourly rate by 1.5 to obtain the overtime rate for that week, and pay the 0.5 premium rate on top of the commissions for any hours worked in excess of 40 for that week. LinkedIn says that the violation “was a function of not having the right tools in place for some employees and their managers to track hours properly.” Likely, it had mis-assumed that its inside salespeople were exempt.

This story offers businesses two important lessons:
  1. Do not assume that you need not pay overtime to employees who are paid other than hourly. The method of pay is not the only factor that determines whether an employee is exempt. Instead, you must undertake a fact-specific analysis for each employee’s job duties to determine if it falls under one of the FLSA’s narrow exceptions. Making assumptions without taking the time to do the analysis will result in costly wage-and-hour mistakes.
  2. If the DOL comes knocking, cooperate. Cooperation helps demonstrate that any errors are sins of omission, not of commission. Ignorance may not excuse FLSA violations, but it will definitely put you in a better light with the DOL than will chicanery. And, if the error is cut and dry, pay. You gain nothing from digging in your heels to fight a clear wage-and-hour mistake, other than incurring a gaggle of legal fees. I’m not saying you should go this alone with legal counsel and guidance, but the lawyer should be guiding you to a resolution, not a costly battle.