Is Your Company Making These Common OT Misclassification Errors?

Employment Law Resources: Littler and ComplianceHR.

Littler, Mendelson is one of the nation’s premier Employment law firms.  I recently took their continuing legal education webinar titled: “Overtime Violations Lurking in Your Company: The Five Most Misclassified Jobs Under the FLSA.”

The webinar was co-sponsored by ComplianceHR, a company offering a system that enables companies to comply with federal and state employment laws in all 50 states.

According to the compliancehr.com website:

“ComplianceHR offers the only on-demand suite of intelligent compliance applications focused on helping companies address the ever-changing federal and state employment law requirements on minimum wage, overtime, independent contracting, FMLA/leave and more.”

The Big 5 Errors.

Below is a summary of my notes from the webinar:

The Fair Labor Standards Act requires employers to pay overtime (at time-and-a-half) to any employee who works more than 40 hours in a work week, unless the employee qualifies for one or more of the exemptions available under the FLSA. Those exemptions include Executive, Administrative, Professional, Computer Professional, and Outside Sales. (Some states such as California have additional, more-stringent requirements).

The employee’s actual job duties, not his/her title, will determine whether that employee qualifies for an exemption.

Lori Brown of Compliance HR used to be a Principal at the Littler firm.  She took the lead on today’s discussion of the top five misclassification errors.

In descending order of magnitude, they are:

  1. Project Managers. Far too many people are given the title of Project Manager when they don’t manage anything. A true P.M. must direct the work of others, plan the project, and be held accountable for the success or failure of the project.
  1. Technicians. To qualify for the Professional exemption, an employee must have a B.S. degree or higher, in a specialty that pertains to the work (such as Electrical Engineering). An A.S. degree does not qualify. The technician also falls short on the requirement to exercise independent judgment. Most technicians get detailed instructions from an engineer.
  1. Entry-Level Accountants. Accountants do regularly qualify for exemption if they have a 4-year degree in accounting. Where entry-level accountants fail the test is that they often find themselves doing low-level tasks such as accounts receivable or bookkeeping. They generate standard reports without exercising independent judgement.
  1. Inside Sales. Unlike Outside Salespeople, there is no exemption for Inside Salespeople. Outside Salespeople spend a substantial amount of their time away from the company’s office (or their own in-home office) visiting customers and meeting prospects. Inside Salespeople do most of their selling either by phone or via the Internet.
  1. Entry-Level IT Employees. An IT employee who doesn’t write code probably doesn’t qualify for a Professional or Computer Professional exemption. Help desk personnel, database administrators, and computer repair personnel likewise fail to meet these exemptions.

Conclusion.

Employers who misclassify an employee as exempt run an increasingly high risk of paying fines, back taxes, and back wages to the aggrieved employee and to the state & federal agencies that share such misclassification data with each other.

Employers who have employees in more than one state face a particularly daunting task of complying with all the applicable regulations.  I think ComplianceHR is worth a look.

Thank you!

Michael Oswald

michael@msochartered.com

www.msochartered.com

Please note: the above post contains educational information. It is not intended as legal advice. Engage an attorney who is licensed in your state to get advice on dealing with any specific legal issue.

© 2020 Michael S. Oswald

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