Exemptions from Overtime Pay
The attorneys at our Firm, located in St. Louis, Missouri, constantly monitor developments in FLSA wage and hour caselaw because such changes may have a significant impact on the rights and duties of businesses and workers across the country. Many claims or disputes regarding unpaid overtime will rise or fall based upon whether "exemptions" are applicable. It is critical to know and understand the relevant legal issues and principles at stake in making FLSA classification decisions. Such classification determination can change and evolve over time as business tasks, relationships, needs and operations change.
FLSA Exemption Considerations
Not all employees are entitled to overtime wages. Federal and state wage and hour laws provide that certain types or classes of workers are "exempt" from FLSA pay requirements. These exemptions vary greatly, covering professionals like doctors and lawyers, executives, and certain administrative employees. Each of these exemptions has several specific requirements which must be satisfied for the claimed exemption to be valid.
Historically, courts have made it somewhat difficult for employers to justify or claim exemptions when a dispute arises. "Where an exemption is alleged, the employer bears the burden of proving that exemption, which is to be narrowly construed against the employer." Childress v. Ozark Delivery of Mo., LLC, 95 F. Supp. 3d 1130, 1134 (W.D. Mo. 2015). This legal principle stems from several prior decisions by the United States Supreme Court, which required employers to prove a claimed exemption falls "plainly and unmistakably" within the letter and spirit of the exemption at issue. See, e.g., Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392 (1960); Mitchell v. Kentucky Finance Co., 359 U.S. 290, 295-96 (1959).
However, the United States Supreme Court recently rejected the ongoing applicability of this principle, at least as to the service advisor exemption to the FLSA. See Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134, 1142 (2018). The Supreme Court found that exemptions are not to be "narrowly construed" on the basis that "the FLSA gives no 'textual indication' that its exemptions should be construed narrowly." Id. According to the Court, "there is no reason to give [them] anything other than a fair (rather than a 'narrow') interpretation." Id. While some courts have noted that this decision appears to have "changed the landscape with regard to interpreting FLSA exemptions," other courts have fairly questioned its applicability beyond the unique statutory provision and facts at issue in Encino Motorcars. See, e.g., Jones v. Giant Eagle, Inc., 2:18-cv-00282, 2019 WL 5073661 at *3-4 (W.D. Pa. Aug. 20, 2019); West v. Southern AG Carriers, Inc., Case No. 1:16-cv-00134, 2018 WL 2753029 at *6 (M.D. Ga. April 27, 2018).
Like misclassification issues, questions regarding exemptions often involve fact-intensive inquiries about an individual's job and day-to-day responsibilities, not just their job title or how they are paid (e.g., hourly, salaried, piece-rate, etc.). Many employees and employers simply do not know about these exemptions or the details of them, resulting in needless uncertainty about rights, damages and liabilities.
Common Misconception: Paying A Salary Means No Overtime Owed
It is common that employers believe that simply paying a salary to an employee renders the employee exempt from overtime pay. This is incorrect. In addition, maintaining an exempt classification requires the employer to pay the employee his or her full salary in any workweek in which he or she performs work, even if the employee does not work a full week. Failing to do so could render an otherwise exempt employee non-exempt under the FLSA and thereafter entitled to overtime pay. Many potential pitfalls exist.
Thus, it is critical for both employees and employers to become familiar with such exemptions, how to ensure they are proper, and how to maintain them over time. Employers should ensure exemptions are properly determined, applied, and periodically reviewed and updated. Doing so helps protect businesses from unanticipated payroll and other liabilities and ensure employees are paid correctly.
Contact a Wage and Hour Law Firm
Our Firm has the knowledge and experience that is necessary to properly advise with any concerns, issues, or disputes about wage and hour exemptions. Please do not hesitate to contact us directly by phone at (314) 645-4100 or by email at firstname.lastname@example.org.