FLSA: Sometimes a Manager is an Hourly Employee
Posted at Arkansas Employment Law by M. McClure on 07/14/2009
Many jobs fall into a gray area where it is difficult for employers, and even courts, to determine whether an employee should be paid overtime.  The Fair Labor Standards Act (FLSA) requires that all employees be paid time and half for hours worked over 40 in a week, unless the employee falls into one of the statute's exemptions.  The exemption that gives employers the most trouble is the Administrative Exemption, although some of the others are tricky too. The Administrative Exemption allows employers to pay an employee a salary and no overtime if the employee: 1) is paid more than $455 per week, 2) performs non-manual work directly related to the management or general business operations and, here's the hard part, 3) exercises discretion and independent judgment.

The District Court for the Eastern District of Arkansas recently denied summary judgment to an employer who relied on the Administrative Exemption to not pay overtime to an employee who held the title "Payroll Manager." Reedy v. Rock-Tenn Co. In making its determination of whether the employee fell into the Administrative Exemption, the court ignored the employee's title and looked instead at what the employee did on a daily basis. The court found that the employer had not provided sufficient evidence to demonstrate that the employee did anything more than clerical work and applying "common sense" to the issues that came to her.  

Bottom line: Misclassification of employees as salaried or "exempt" can be serious for an employer. These claims often present themselves as class actions.  Employees can claim unpaid overtime for up to two years, and for three years, if the violation is found to be willful. When faced with a FLSA classification issue, employers should look at the specific work the employee is performing and monitor the nature of the work to ensure that the day-to-day tasks do not drift into work protected by the FLSA.  And, don't try to cut corners on HR employees - they know the rules of the game.