Employers Face Risks When Classifying Employees As Exempt

posted by Michael R. Fortney  |  Nov 6, 2014 08:00 AM in Employment Law:Contracts and Agreements

The 6th Circuit recently held that an employee of Belle Tire with an "executive" job description was not automatically exempt from overtime under the Fair Labor Standards Act ("FLSA") when the employee's actual duties differed from the job description.

Certain classes of employees are not eligible for overtime compensation under the FLSA because they fall within an exemption. The list of exemptions is fairly long and includes certain commissioned sales people, drivers, farm workers, seasonal jobs, and executive or administrative employees. 

The 6th Circuit overturned an award of summary judgment on behalf of Belle Tire. Belle Tire argued that the employee, Little, had the title of "executive" because he was responsible for creating work orders and the work schedule. However, the Court found that virtually all of the employees in the Belle Tire sales department where Little worked were responsible for creating work orders, and Little was required to submit the work schedule to a manager for final approval, creating the appearance that Little's executive role did not truly mean he had executive power.

Employers don't have to pay overtime to executive employees because they are exempt, but employers should be certain that the "executive" classification is justified and will not be viewed by the court as circumventing the FLSA. If a court overturns an employer's classification, the resulting damages and legal fees can be costly.  Employers should ensure that exempt employee classifications fit within the FLSA.

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