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Job Titles Don't Protect Employers from Wage and Hour Suits

The Fair Labor Standards Act (FLSA) makes clear that an employee's actual duties, not job title, must be considered when determining whether that employee is exempt from overtime pay.

In accordance with the FLSA's directive, a federal district court has ruled that all audit associates for a major accounting firm have sufficiently similar duties to certify them as a class in an FLSA lawsuit against their employer. (Pippins, et al. v. KPMG LLP, Case No. 1:11-cv-0037 (S.D.N.Y.)). The ruling means that all audit associates within a three-year period are eligible to participate in the lawsuit. The class certification will apply to more than 80 offices and 23,000 employees nationwide.

The audit associates claim they were misclassified as exempt from federal rules mandating overtime pay.

Misclassification occurs across a wide spectrum of workers and industries. White-collar workers in such industries as finance, banking, and accounting often are misclassified simply based on job titles. In general, for a legal exemption from overtime payments to apply, an employee's job duties must involve significant judgment and discretion rather than consist of routine duties that are controlled by superiors or corporate policies and practices.

Employees with lofty titles who work long hours of primarily clerical and routine duties are entitled to overtime. "So-Called White-Collar Workers have Overtime Rights Too: NY Judge Certifies Class of KPMG Audit Workers," (Jan. 10, 2012).

Commentary and Checklist

The Wage and Hour Division (WHD) of the Department of Labor (DOL) is charged with enforcing the FLSA. According to the FLSA, a plaintiff can create a "collective action" of employees belonging to a similarly-situated class of current or former employees.

The court will look at the pleadings and any affidavits submitted by the WHD on behalf of employees (audit associates, in this case) to decide whether the employees are similarly situated to the original employee who filed the lawsuit. If the court finds that all of the employees may have been victims of a common scheme or plan that violated the law and may want to opt in to the lawsuit, the court conditionally certifies the class.

The employer can later request decertification of the class. However, the initial certification makes each similarly-situated employee who worked for the employer within three years of the lawsuit a potential claimant. Potential claimants are directly notified about the lawsuit and given the option to join it.

Properly classifying employees is the first step in avoiding wage and hour class actions. Rest assured, the WHD will ignore lofty titles if your pay practices come into question.

The key to proper employee classification as exempt or non-exempt is based on two factors-compensation and primary job duties. If an employee's daily tasks are routine and strongly directed by managers or employer policies, the employee will fall into the category of non-exempt, regardless of his or her job title. At the same time, an employer can pay some employees within a particular job title on an hourly basis and others with the same job title on a salary basis. Exempt status is based on an assessment of each individual employee's unique job duties and a salary basis of compensation.

Now is a good time to evaluate job positions in your workplace, particularly those jobs with impressive titles. Start with the assumption that a job is not exempt from wage and hour laws. Employers should perform a case-by-case evaluation of the employee's job duties to determine whether he or she is exempt from overtime pay laws. Remember to check your state laws because the analysis needed may differ from the one required to comply with the federal FLSA provisions.

The FLSA provides exemption from both minimum wage and overtime pay for employees under the following exceptions, each of which has a distinct statutory definition. Specific compliance resources are set forth on the FLSA webpage.  For particular guidance with regard to some jobs, visit the FLSA Overtime Security Advisor, Occupation Index.

Here are the general exception categories:
  • Executive employees,
  • Administrative,
  • Professional, learned or creative,
  • Outside sales employees, and
  • Certain computer employees.
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