From seminar covering new developments in wage and hour enforcement and how to legally classify employees as exempt.

1. Greater Sumter Chamber of Commerce
FLSA: Exempt or Not Exempt,
That is the Question
May 23, 2012
David Dubberly
Certified Specialist in Employment and Labor Law

2. A Dramatic Question
“To be or not to be [exempt], that is the
question [for HR Managers].”
[With apologies to] William Shakespeare

3. Overview
• FLSA review and enforcement trends
• “White collar” exemptions
– Executive employees
– Administrative employees
– Professional employees
– Computer employees
– Outside sales employees
• Salary basis rule and safe harbor
– Business owners
– Highly compensated employees

4. FLSA History
• Enacted in 1938
• Can be tough to apply to
modern work practices
– Telecommuting
– Flexible hours
– Use of smartphones outside
work

5. Main Provisions
• Minimum wage
• Overtime pay
– Exemptions—mostly for “white collar” employees
• Focus of most FLSA litigation
• Regulations updated 2004
• Youth employment
• Recordkeeping

6. Enforcement
• WHD
– Investigations
– Lawsuits
• Injunctive relief
• Back wages and liquidated damages
• Private Lawsuits
– Back wages, liquidated damages, attorney’s fees, and costs
– Collective actions
• DOJ
– Criminal prosecution and civil money penalties

7. WHD Getting More Aggressive
• 350 more
investigators since
2009
• 13,500 more
investigations since
2009

8. WHD Getting More Aggressive
• DOL-ABA “Bridge to Justice” referral program
• DOL “apps” for smart phones
– Timesheet app
» Can provide evidence for FLSA lawsuit
» But time recorded on app may be inaccurate
– Eat Shop Sleep app
» DOL: “Access hotel/motel, restaurant and retail
industry enforcement data and easily identify
violators”
– iCitizen Labor Report app
» Adds OSHA data

13. WHD Getting More Agressive
• Investigation information on internet at
http://ogesdw.dol.gov
– MSHA, OSHA, EBSA, OFCCP, and WHD
– On WHD:
• Employer names and addresses
• Back wage amount
• Employees due back wages
• Penalties

15. Private Lawsuits Continue to Increase
• 2011 FLSA suits in federal court = 7,000
• Approx. 200 class actions
• In 10 years, 300% increase in FLSA suits v. 1%
increase in all suits
• Frequent complaints:
 Misclassifying employees as exempt
 Improper deductions from exempt employees’ salaries

18. Executive Employees
• Pay: salary basis at least $455/week ($23,600/year)
• Management: primary duty is management of
business or customarily recognized department or
subdivision
– Setting and adjusting employee pay and hours
– Maintaining production or sales records
– Evaluating employee performance
– Handling employee complaints and grievances

19. Executive Employees
• Supervision: customarily and regularly
supervises work of two or more other
employees in department
• Authority: hires or fires other employees
– Or recommendations as to hiring, firing, or
other status changes given particular weight

20. Jobs that May Qualify*
 Plant manager
 Department supervisor
 Store manager
 Construction project
superintendent
*Depending on facts—job title
alone insufficient to establish
status

21. Jobs that Typically Don’t Qualify*
 Working foreman
 Relief supervisor
 Store “manager” who spends only
small part of time on exempt work

22. Case Study: Gooden v. Dolgencorp Inc. and
Thomas v. Dolgencorp Inc.
• Decided Apr. 3, 2012 by federal court in SC
• Two DG store managers covered by executive
exemption
• Primary duties were managerial
– Hiring, supervising, and disciplining employees
– Promoting, demoting, and firing employees
– Providing training and setting and adjusting work
schedules
– Delegating and prioritizing tasks and assignments

23. Case Study: Gooden v. Dolgencorp Inc. and
Thomas v. Dolgencorp Inc.
• Spent over 50% of time on these managerial duties
• These duties important to ensure success of stores
• Mostly exercised discretion in performing these
duties
– Not overly limited by district managers or SOP
• Paid more than nonexempt employees
– And could earn bonuses based on store
profitability

24. Salary Basis
• No reduction in pay for variations in quality or
quantity of work
– Can reduce paid sick or personal leave time
• Pay of full salary for any week in which any work
performed, regardless of number of days or hours
worked
– Don’t have to pay for any week in which no work
performed

25. Permitted Deductions
• Absence for one or more full day for personal
reasons other than sickness or disability
• Absence for one or more full days for sickness or
disability if employee is covered under sick leave
policy
• Offset equal to amount received for jury fees,
witness fees, or military pay

26. Permitted Deductions
• Penalties imposed in good faith for violating safety
rules of major significance
• Unpaid disciplinary suspension of one or more full
days imposed in good faith for violation of written
workplace conduct rules
• Partial workweek during first or last week of work
• Unpaid FMLA leave

27. Safe Harbor Policy
• Exemption not lost over salary basis if:
– Clearly communicated policy prohibiting
improper deductions with complaint
mechanism
– Reimburse employees for improper
deductions
– Good faith commitment to comply
• Not available if employer willfully
violates policy by continuing to make
improper deductions after complaints

28. Business Owners
• Own at least a “bona fide” 20% equity interest
in business where works
• Actively engaged in management of business
• Salary level and salary basis requirements
don’t apply
• No duties test

29. Highly Compensated Employees
• Pay: total annual compensation of at least
$100,000/year
– At least $455/week paid on salary basis
– Including commissions, non-discretionary bonuses,
and other non-discretionary compensation
– Excluding cost of benefits

30. Highly Compensated Employees
• Duties: customarily and regularly performs at
least one exempt duty of an EAP employee
– Primary duty includes performing office or non-
manual work

31. Administrative Employees
• Pay: salary or fee basis at least $455/week
($23,600/year)
• Duties: primary duty is
– Performance of office or non-manual work
– Directly related to management or general
operations of employer or employer’s
customers

32. Administrative Employees
• Discretion: primary duty includes
exercise of discretion and independent
judgment with respect to matters of
significance
– Exercise of discretion and independent
judgment = comparing and evaluating
possible courses of conduct, and acting or
making decision after various possibilities
considered

33. Jobs that May Qualify*
• Insurance claims adjuster
• Certain financial industry
employees
• Team leader for major
projects
• Administrative assistant to
senior executive
• HR manager
• Purchasing agent

34. Jobs that Typically Don’t Qualify*
• Inspector
• Examiner/grader
• Comparison shopper
• Personnel clerk
• Mortgage loan officers

35. Case Study: Foster v. Nationwide Mutual
Insurance Co.
• Decided Jan. 5, 2012 by federal court in OH
• 91 “special investigators” administratively exempt
• Primary duty was conducting investigations to
resolve indicators of fraud in suspicious claims
– Interviewed witnesses
– Gathered information
– Recommended and sometimes supervised
vendors

36. Case Study: Foster v. Nationwide Mutual
Insurance Co.
• Involved exercise of discretion and independent
judgment
– Used “experience and knowledge … to distinguish
relevant from irrelevant, fact from untruth, to resolve
competing versions of events”
– Had “nearly unilateral discretion” in referring cases
with unresolved fraud indicators to law enforcement
• Related to matters of significance
– Helped determine if claims paid or not

37. Learned Professional Employees
• Pay: salary or fee basis (some professionals exempt
from this) at least $455/week ($23,600/year)
• Duties: primary duty is performance of work
requiring advanced knowledge
– Work must be predominantly intellectual and require
consistent exercise of discretion and judgment
– Advanced knowledge must be in field of science or
learning customarily acquired by prolonged course
of specialized intellectual instruction

38. Jobs that Typically Qualify*
• Medical doctor, osteopathic • Lawyer
physician, podiatrist, • Engineer
dentist, optometrist • Teacher
• Registered nurse • Accountant
• Certified medical • Executive chef, sous chef
technologist
• Certified athletic trainer
• Dental hygienist
• Certified physician
assistant
• Pharmacist

39. Jobs that Typically Don’t Qualify*
• Licensed practical nurse
• Nurse aide
• Paramedic
• Paralegal, legal assistant
• Engineering technician
• Accounting clerk, bookkeeper
• Cook

40. Creative Professional Employees
• Pay: salary or fee basis (film industry
employees exempt from this) at least
$455/week ($23,600/year)
• Duties: primary duty is performance of work
requiring invention, imagination, originality, or
talent in recognized field of artistic or creative
endeavor

41. Jobs
Typically Qualify* Typically Don’t*
•Musician, composer, conductor, •Beat reporter
soloist
•Novelist, play writer
•Writer for ad agency
•Actor
•Painter, photographer
•Investigative news reporter

42. Computer Employees
(Other than those qualifying for EAP exemptions)
•Pay
– At least $27.63/hour for every hour worked, including overtime, or
– Salary or fee basis at least $455/week ($23,600/year)
•Duties
– Apply systems analysis techniques
– Design, document, analyze, create, or modify computer systems
or programs
– Modify computer programs

43. Jobs
Typically Qualify* Typically Don’t*
•Computer systems analyst •Entry level
•Most computer programmers programmers
•Computer
manufacture and
repair
•CAD operators
•Help desk workers

44. Outside Sales Employees
• Pay: no requirement on basis or amount
• Duties: primary duty must be making sales or
obtaining orders or contracts for services or use
of facilities
• Location: customarily and regularly engaged
away from employer’s place of business

45. Jobs that Typically Qualify*
•Most sales reps
• Pharma sales rep case heard by U.S.
Supreme Court on Apr. 16, 2012 (Christopher
v. SmithKlineBeecham Corp. d/b/a
GlaxoSmithKline)
•Some real estate agents

46. Common Errors to Avoid
•Assuming all employees paid salary are
exempt
•Improperly applying exemption
•Making improper deductions from salary
•Job descriptions and employee handbook
not up to date

47. Questions/Comments?
David Dubberly
803-253-8281
ddubberly@nexsenpruet.com