Six Lessons Learned: When an Employee Is NOT Exempt
by BOL Guru Gerard P. Panaro
Howe and Hutton, Ltd.
Editor's Note: On May 1, 2003, a judge in King County Superior Court approved a $4.1 million settlement in a class action suit brought against Bank of America by employees who alleged they were encouraged to work extra hours, but were not paid for overtime. The bank did not admit wrongdoing. The bank believed the employees were exempt from overtime pay because they were salaried employees.
 It's unfortunate that Bank of America had to pay $4.1 million to realize two very common mistakes about federal minimum wage law: one, it is the nature of the work performed that determines exemption: not "salary" or job title (although one of the criteria for determining whether or not one is exempt is that to be exempt, the employee must be paid on a "salary basis"). You can pay a washroom attendant a salary of $50,000 a year, and that still will not make him or her an "exempt" employee, because washroom attendants don't do exempt work.
Although there are something like 18 or 20 "exemptions" from the requirement to pay overtime, the three most common are executive, administrative and professional. An "executive" is one who supervises two or more employees; and "administrative employee" is one who has responsibility for a line of work or a corporate function; and a professional is someone like an inhouse attorney, CPA or doctor.
The second lesson is that any work an employer "suffers or permits" to be performed must be compensated, regardless of whether it is done at the workplace or elsewhere. In the context of paying non-exempt employees, there is no such thing as "voluntary" overtime: if the work is performed, it must be paid for.
A third very important point about federal minimum wage law is this: the measure of overtime is the workweek, not the pay period. Every workweek: a period of seven consecutive calendar days, stands on its own. So, if a non-exempt employee works 50 hours in one week, s/he must be paid overtime for 10 hours (any hours over 40 are "overtime"), even if s/he only works 30 hours in the following week: it is the workweek, not the pay period, that is the measure of whether or not overtime compensation is due.
From this a fourth lesson follows: in the private sector, there is no such thing as "comp time": in other words, you have not satisfied your obligations toward non exempt employees under the federal Fair Labor Standards Act (FLSA) if you require a non exempt employee to work 45 hours in one week, but then give him or her five hours off the next week (so that s/he only works 35 hours). Any comp time must be given in the same week.
Fifth, under state law, which, if it is more liberal, supercedes federal law, you may be required to give employees a break of a certain duration after a certain number of hours worked (e.g., 30 minute break after six hours of work). There is no such requirement under federal law. Some states also mandate allowing an employee one day a week off to observe as a "sabbath."
Sixth, the burden of determining whether one is an exempt or non-exempt employee; and the burden of keeping accurate records of hours worked is on the employer. One should never tell employees to record anything but their actual hours worked, or otherwise falsify their time records in any way. If the Wage and Hour Division of the federal Department of Labor determines that records have been falsified, not only does the statute of limitations go back another year, from two to three, but the Division can also impose "liquidated" damages equal to the unpaid overtime on the employer. So, in other words, if it is found that the financial institution owes a nonexempt employee $10,000 in backpay, it can be ordered to pay $20,000 (another $10,000 in "liquidated" damages).
Related articles on BOL
Helpful Resources
from the Dept. of Labor
First published on BankersOnline.com 5/5/03
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