Exempt, Non-exempt, Misclassification
This area of law considerably complex. There are generally three types of exemptions (i.e., exclusions from the payment of overtime): (1) The executive exemption; (2) the administrative exemption; and (3) the professional exemption. Each of the three exemptions contains various elements of law.
If an employee meets the legal elements under at least one of these exemptions, he/she is properly exempt and, therefore, will not be entitled to overtime pay or other wage and hour benefits which are customarily available to non-exempt employees.
Note: There are a few additional rules of law which may be applicable to certain other limited types of occupations that may also exclude an employee from the payment of overtime.
Misclassification of exempt employees remains a frequent problem these days, leading to substantial employer liability. Often, an employer either incorrectly classifies its employees as exempt or engages in conduct during employment which causes a properly classified employee to loose exempt status – conduct such as frequently deducting missed work time from salary. An improperly classified employee may be entitled to the overtime compensation which the employee should have been paid during the statute of limitations period (three or four years), as well as, penalties, interest and reimbursement of reasonable attorney fees and costs.
Moreover, employees who have complained about a misclassification and who have suffered adverse consequences as a result, may also have a separate claim of retaliation which may make available the following additional damages: Compensatory damages, emotional distress damages, and punitive damages.
Types of Employees That May Be Frequently Misclassified as Exempt
- Any manager, supervisor, office employee or non-manual labor employee who does not spend at least 50% of his/her time performing management duties;
- Any manager, supervisor, office employee or non-manual labor employee who does not earn a salary equivalent to twice the minimum wage for full-time work (i.e., $3,096 per month effective as of July, 2014);
- Any manager, supervisor, office employee, or non-manual labor employee who does not customarily exercise discretion and independent judgment;
- Any manager or supervisor who does not customarily manage at least two or more employees;
- Any office employee or non-manual labor employee who does not either regularly and directly assist a proprietor, executive or administrative employee, or operate under only general supervision;
- Any office employee or non-manual labor employee who does not perform work that is directly related to management policies, general business operations, or the employer's customers;
- Certain employees who perform either manual labor or nonsupervisory duties more than 50% of the time;
- A commissioned employee whose commissions do not represent more than half their compensation or whose earnings do not exceed one and one half times the minimum wage;
- A commissioned employee who is not principally involved in selling a product or service and whose commission is not based on a percentage of the sale price;
- Independent contractors may sometimes be misclassified. An analysis of the degree of control retained by the independent contractor during the performance of his/her duties is generally necessary to determine whether an independent contractor is entitled to overtime pay;
- Note: A properly classified employee may lose exempt classification if an employer regularly deducts from his salary for missed workdays which may, in turn, entitle the employee to overtime pay.
The above represents only some examples of misclassified employees who may be entitled to overtime pay. There is a myriad of other types of misclassified employees not listed above.