Wal-Mart has agreed to pay $4.8 million in back pay and damages after the U.S. Department of Labor (DOL) found that the company failed to pay overtime to more than 4500 workers. Labor claimed Wal-Mart improperly classified security guards and some eye care managers as exempt and therefore did not have to pay them overtime. The Department of Labor disagreed and stated that these workers were nonexempt under the Fair Labor Standards Act (FLSA) and should have been paid overtime for all hours worked in excess of 40.
You may be thinking that you’re not Wal-Mart and therefore have nothing to be concerned about. Unfortunately, you’d be wrong. Misclassification of workers is a very common mistake made by employers and the DOL has been clamping down on these, handing out heavy damages.
So what’s the difference between exempt and nonexempt and is this the same thing as classify a worker either hourly and salaried? The federal Fair Labor Standards Act (FLSA) identifies three categories of employees: Hourly, Salaried Nonexempt, and Exempt. Hourly employees receive an hourly wage for all hours worked and time-and-one-half for all hours worked in excess of 40 per week. Salaried Nonexempt employees are paid a weekly salary for a set number of hours, but also receive time-and-one-half for all hours worked in excess of 40 per week. Exempt employees are paid a salary of at least $455 per week or $23,660 per year and must meet one of five FLSA testing guidelines. The tests are categorized for workers who are administrative, professional, executive, computer-related, or outside salespersons as stated by the FLSA. If the position meets the respective requirements as an exempt employee, then they are not entitled to overtime, regardless of hours worked. If they do not meet the guideline, then they are nonexempt and must be paid overtime for all hours worked in excess of 40. The law also contains a “highly compensated employee” exemption and rules for deductions of pay to exempt employees for absences.
The tests are very complex.
So unless an employee meets these strict testing requirements, the position should be classified as nonexempt and the employee should be paid overtime for all hours worked over 40.
If you have any questions on how to properly classify your workers, give me a call.