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The Corporate CounselorLJN NewslettersNewsSections

Navigating the FLSA's 'White Collar' Exemptions

By Audrey N. Browne
August 19, 2003

Most sophisticated employers are aware that the Fair Labor Standards Act (FLSA) requires that employees be paid overtime when they have worked more than 40 hours per week. Most employers also know that the FLSA contains certain exemptions from that rule. Those exemptions include what are commonly known as the 'white collar' exemptions. The white collar exemptions apply to those employees 'employed in a bona fide executive, administrative, or professional capacity.' When those exemptions apply, they may save significant overtime costs and ' often more importantly ' provide employers with useful flexibility for scheduling employees. Unfortunately, many employers in various industries are classifying employees as exempt who do not qualify for the exemption. Failure to pay overtime compensation to employees who are not legally exempt can result in employer liability for the unpaid overtime, liquidated (double) damages, and attorney fees. Given the significant impact that such liability can have on a business and the fact that overtime litigation is increasing exponentially, misclassification of employees is a growing area of concern for employers.

There are many common mistakes that employers make when attempting to classify their employees for purposes of exempting them from overtime compensation. One of the most common mistakes is assuming that if an employee is paid a salary as opposed to an hourly wage, that fact is sufficient to classify the employee as exempt. Another oft-made mistake is assuming that written job descriptions, as opposed to actual duties, constitute grounds upon which to classify certain employees as exempt. Both assumptions are grossly incorrect. The fact that an employee is paid a salary is only one of many factors necessary for classifying an employee as exempt. Similarly, while job titles and written job descriptions may assist in the classification process, it is the actual duties that an employee performs which determine whether or not that employee is exempt.

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