Oftentimes when we get a call from a client about overtime, our first question will be to ask if the employee is exempt or non-exempt. The answer we get is almost always: “salaried” or “hourly.”
So, first things first: salaried does not mean exempt.
Many employers assume that if their employee is salaried, he or she is exempt.Not so.There can be hourly exempt employees, and there can also be salaried non-exempt employees.
While the more common exemptions will require that exempt employees be salaried, being salaried is just one part of the equation.To be exempt under the more common exemptions (such as the professional, administrative, and executive exemptions), the employee must meet two tests:(1) he must receive a salary of at least $455 per week; and (2) he must perform certain job duties.These requirements are established by federal law, and different exemptions require different job duties.Unless you are certain that your employees meet the requirements of an exemption, you should consider requiring all of your employees to keep time records.
Most employers require their hourly employees to keep time records and follow time-keeping protocols.In addition to complying with federal law, this allows the employers to pay the employee for the hours worked.The hourly employee will clock-in when he arrives at work, clock-out when he takes lunch, clock-in when he comes back from lunch, and clock-out at the end of the day.Entitlement to overtime becomes a simple mathematic calculation.
For salaried employees, however, it is very common for both employer and employees to believe that since the employees are salaried, they do not get paid overtime and, therefore, do not need to keep time records.This is sometimes, but not always, true.A salaried employee will not be entitled to overtime if he is also an exempt employee.However, if your salaried employee is a non-exempt employee, your employee is entitled to overtime regardless of whether he is paid on an hourly or salary basis.
Many wage claims that we see are brought by terminated employees who were being paid a salary.After termination, they claim that they were misclassified as exempt, and that they really performed non-exempt duties—entitling them to overtime.The terminated employee may “remember” that he worked at least 50 hours a week, every week.The employer, of course, has a different memory, and it rarely coincides with the employee’s.So, if neither you nor the employee has kept accurate time records, you will be at the mercy of the employee’s memory.This can add up to a lot of overtime for the employee, and a lot of exposure for the employer (and if you think that only dishonest employees will sue you, please remember that sometimes 40 hours can feel like 50 hours).
If an employee does file suit against you, your exposure could be significant and could include the actual overtime wages, liquidated damages equal to the amount of the overtime wages, and attorneys’ fees (both for your own attorney and the employee’s attorney).Then, too, certain individuals acting on behalf of the employer may also be personally named in the lawsuit and be subject to personal liability.
There are 2 ways to try to avoid this:job descriptions and time records.
First, keep an accurate and up-to-date job description that specifies the job duties for each position.If you are seeking to claim certain positions as “exempt,” the job duties listed for those positions should include the job duties required by federal law—and the employee should actually be performing those duties.Having a job description that says an employee is responsible for doing certain things will not create an exemption if the employee does not actually do those things.
Second, require all of your employees—not just the hourly employees—to keep accurate time records.In this way, if an employee does later challenge an exemption, you can try to minimize your exposure by both (a) knowing the extent of your potential liability at the forefront and being in a better position to negotiate, and (b) minimizing any opportunity for an employee to remember that he worked more hours than he actually did.
Some employers already have time keeping mechanisms for all of their employees.In a recent litigation, an opposing attorney calculated his client’s damages to be over $100,000 based upon his client’s recollection of his hours worked.But our client kept time records.Needless to say, after we advised the attorney that our client kept time records, counsel’s next settlement offer for unpaid wages was 70% lower than his initial calculation.
In our experience, the best defenses to these lawsuits are laid long before a lawsuit is ever filed.You should have clear job descriptions that are periodically updated, both as the laws change and as job duties change, and you should consider implementing a time keeping policy for all of your employees. With the implementation of these policies, you will be in a better position to either defeat a lawsuit for unpaid wages, or to resolve it in a more cost efficient manner that allows you to focus your attention on growing your business, instead of focusing on something that will almost certainly cost your company a lot of time, energy, and money.
Cristina E. Groschel and Bruce E. Loren of Loren & Kean Law are based in Palm Beach Gardens and Ft. Lauderdale. Loren & Kean Law is a boutique law firm concentrating in construction law and employment law. Ms. Groschel is certified as a Professional in Human Resources (PHR), and focuses her practice on labor and employment law, representing the interests of employers and business owners. She counsels clients on a wide variety of Human Resources issues, and has represented businesses in a wide range of disputes. Ms. Groschel and Mr. Loren can be reached at [email protected] or [email protected] or 561-615-5701.
