Worker Misclassification: Challenges of Determining Exempt vs. Non-Exempt Employees

Accurate employment classification continues to be the subject of extensive lawsuits. Recent cases regarding who is entitled to overtime pay fuel the litigation and claims by employees challenging their classification as exempt from overtime pay under the FLSA are increasing. Some federal suits have resulted in multi-million dollar verdicts as exemption cases are often filed as both class and collective action lawsuits. State lawsuits are also on the rise and state wage and hour laws are often more employee-friendly than the FLSA particularly in states like California where they continue to be hotly litigated. In California, non-compliance exposes companies to individual, Private Attorneys General Act (“PAGA”), other representative actions and class action claims. There, wage and hour laws continue to multiply, with new laws, regulations, court decisions, and myriad changes to existing laws, impacting employer compliance obligations on a quickly evolving pace.

The U.S. Department of Labor reports that approximately 70 percent of employers are out of compliance with the FLSA's classification requirements. To avoid potential claims, employment counsel must advise employers to reexamine and, where necessary, adjust their worker classification practices.

Listen as our authoritative panel of employment attorneys examines the types of positions most at risk for misclassification as exempt, explains best practices for self-audits, and suggests measures employers should take to correct classification errors and limit liability exposure.

1. Current legal trends, including the status of the "salary basis" rule and salary level under the FLSA and state laws
2. Positions most vulnerable for FLSA and state claims: how to determine the correct classification
   1. Clerical and administrative support personnel
   2. Assistant managers, supervisors, and team leaders without sufficient staff
   3. IT workers
   4. Sales staff
3. Self-audit strategies
   1. Who should conduct an audit?
   2. Review pay practices and policies: overtime, bonuses, etc.
   3. Review job descriptions versus what employees actually do
   4. Review new positions added after a merger or acquisition
   5. Documenting the audit
4. Correcting errors and limiting liability exposure
5. Establish compliance program
6. Reclassify positions to protect exemptions
7. Consider voluntarily paying back wages
8. Whether to notify the DOL of the error
9. Prepare for state or federal regulatory inquiry into classification practices

The panel will review these and other key issues:

• Which positions are most often misclassified as exempt--and how can employers and their counsel best determine the appropriate classification for such positions?
• What self-audit approaches are effective to identify and correct errors with a focus on compliance with the duties and salary basis tests--and protect the company from future liability?
• What are the legal risks of voluntarily paying back wages to misclassified employees? If such payments are made, how far should an employer go back and should liquidated damages be included?
• Should employers take the initiative to notify the Department of Labor of classification errors discovered during self-audits? As private FLSA releases are generally not enforceable, what other measures can an employer take to minimize exposure against exemption claims?