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Although the Fair Labor Standards Act (FLSA) has been around since the late 1930's, it likely ranks as the employment law most misunderstood and misapplied by employers and employees alike. The law was originally conceived as part of Roosevelt's New Deal with the purpose of using overtime requirement as an incentive for employers to spread work among an under-employed population. Today, high tech employers face a shortage of qualified workers and are often forced to have staff work longer to meet production deadlines. As a rash of recent overtime cases demonstrate, without careful attention to the FLSA's overtime exemption criteria, companies can incur tremendous liability for entire segments of their workforce. The FLSA divides employees into those who are "exempt" from overtime requirements, and those who are "nonexempt" and must be paid one and one-half times their wage for hours worked in excess of forty. Many employers and employees simply assume that employees paid a salary are exempt and those paid by the hour are not. While in most cases a salary, i.e., a guaranteed minimum payment made regardless of hours worked, is an essential component for a FLSA exemption, an employee must also meet specific duties tests to qualify. With the tremendous growth in alternative work structures such as flex time and telecommuting, and the evolving nature of professional, administrative, and management positions in high tech firms, many employers have been shocked when entire classes of their employees are found not to meet the complex requirements of the salary basis or duties tests and must be paid back pay and damages. The FLSA requires overtime for all employees, unless they are exempt as administrative, executive, professional, or computer related employees, or meet one of the generally outdated sales exemptions. Except for the computer professional exemption, which applies to certain employees making at least $27.62 per hour, the non-sales exemptions require payment of a salary that cannot be reduced when, for example, an employee takes a few hours off to go to the dentist or a child's soccer game. This salary requirement has proved to be particularly problematic for government contractors, who often pay professional employees on an hourly basis tied to hours charged to a particular contract. To further complicate matters, each exemption also has a separate duties test requiring such things as the exercise of discretion and judgement, supervision of others, and specialized education and expertise. Whether an employee meets the duties requirement for an exemption is dependent upon what she actually does, rather than her job title or position description. Indeed, inside the beltway, where an impressive title is often bestowed on the most routine position, employees are frequently misclassified as exempt administrative or professional staff. The FLSA and its regulations were developed in a world without computers, telecommuting, or flexible staffing, and should be revised to accommodate the modern workplace. As those who enforce the FLSA continue to apply outdated definitions and concepts to employees working with new forms of technology in non-traditional arrangements, employers must become cognizant of the complex requirements for overtime exemptions. As their businesses change, employers should routinely review job classifications to avoid inadvertently creating overtime liability from evolving position responsibilities, working practices, and management structure. © 1998 Jeffrey Berger REPRINTED FROM: |
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