Exempt Vs. Non-Exempt Employees: How to Avoid the Sinkhole of FLSA Lawsuits

Get educated on how exempt employees differ from non-exempt employees. Knowing the difference could save your business from a costly FLSA lawsuit.

In a previous article, you learned the differences between employees and independent contractors. Once a worker is determined to be an employee, the next step is determining whether they are exempt or non-exempt from FLSA minimum wage and overtime pay requirements. The Fair Labor Standards Act requires employers to pay non-exempt employees for overtime hours at a rate of one and a half times their regular pay, with “overtime” defined as more than 40 hours worked in a work week.

Properly classifying employees as exempt or non-exempt is the cornerstone of complying with the FLSA. Misclassification is a common ground for lawsuits against employers. Fines, penalties and back pay for FLSA violations can add up to an enormous, even crippling, sum that may far surpass the cost of paying overtime. Further, back pay owed to employees who were misclassified can be doubled as a means of bolstering compliance with the law.

Know the difference

With few exceptions, an exempt employee must

  • be paid at least $23,600 per year ($455 per week);
  • be paid on a salary basis; and
  • perform exempt job duties.

Most employees must meet all three “tests” to be exempt. Exempt job duties include: executive, administrative, learned professional, creative professional, computer science and outside sales.

In addition, highly compensated employees performing office or non-manual tasks, paid in excess of $100,000, are exempt if they customarily perform one of the mentioned duties.

Implement your knowledge

Once you have developed a thorough understanding of the differences between exempt and non-exempt employees, follow these steps to protect your company from FLSA exposure:

  1. Conduct an extensive self-audit to ensure that all employees are properly classified by using the tests mentioned above.
  2. Train managers on wage and hour regulations, and explain how errors negatively affect the company. Remind them that wage and hour compliance is part of their duties.
  3. Educate your staff about company rules regarding overtime, proper time clock usage, meal and rest periods, and all other wage and hour related items.
  4. Determine repercussions for employees who break company rules in this area, and educate the staff on them.
  5. Take all wage and hour complaints seriously, immediately correcting any errors.
  6. Be careful when new positions are added, especially if they are added because of mergers or acquisitions. If the previous company misclassified its employees, you might be responsible even though the merged or acquired entity may no longer legally exist.

Ohio law

Under Ohio law, employers grossing more than $150,000 per year are required to pay overtime to non-exempt employees at a rate of one and a half times the employee’s wage rate for any hours worked over 40 within one work week.

Employers grossing less than $150,000 are not required to pay overtime for hours worked beyond 40.

In most circumstances, the employer should follow the rule that is most advantageous to the employees when federal and state laws differ. For instance, the current federal minimum wage is $7.25 per hour, but the current minimum wage in Ohio is $8.10 per hour. This means Ohio employers must use the state minimum wage of $8.10, as this is most advantageous to employees. Thus, the minimum overtime rate in Ohio is $12.15 per hour. However, if the employer grosses less than $297,000, it may use the federal minimum wage as a basis for paying overtime.

Conclusion

Determining an employee’s exemption status isn’t always simple. It pays to know the rules ahead of time because the wrong classification can trigger a painful inquiry from the IRS and the Ohio Department of Labor, as well as other fines and penalties. Following these tips will help you to stay ahead of the game and ensure that your employees are properly classified—saving your business a huge chunk of change!

Disclaimer

This article is made available for educational purposes only, as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this information, you understand that there is no attorney-client relationship between you and the author. In no event should any information contained here be used as a substitute for competent legal advice on your own individual situation from a licensed attorney in your state. For more information on this topic, contact Alex Gertsburg at 440-571-7775 or ag@gertsburglaw.com. Get more legal tips for your business on The Gertsburg Law Firm blog, with new articles every week.

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  • Next up: Firearms in the Workplace: What You Need to Know
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  • Firearms in the Workplace: What You Need to Know

    With workplace violence and shootings on the rise, it’s crucial for business owners to outline firearm policies for their employees. In order to do so, employers must know the laws regarding employee possession of firearms. Read on as we unpack these laws and detail potential scenarios that could trigger this type of violence.

    Workplace violence and workplace shootings are a real concern for employers of all sizes. As a result, many employers are considering policies prohibiting their employees from possessing firearms during work time or on their premises. Policies such as these can help to protect employers from liabilities. Every employer should consider instituting these policies with a full understanding of the laws and the steps that need to be taken.

    The United States is a country that protects the rights of its citizens to bear arms. And with workplace shootings and workplace violence on the rise, people are exercising that right by purchasing and owning firearms. As a result, it is imperative that employers understand the laws and what their rights are when restricting firearms in the workplace.

    Know the law

    While employers are not generally liable for crimes committed by their employees, they could bear some liability for crimes committed by employees who have guns at work. This falls under negligent hiring, supervision or retention; worker’s compensation; or the Occupational Health and Safety Act (OSHA). What’s most important here is if the employer knows or should have known of an employee’s violent tendencies and that the employee possessed a firearm. Employers have a responsibility to provide a safe workplace. Every employer should have a thorough understanding of federal and state laws regarding firearms in the workplace and consulting with an attorney on these matters is highly recommended.

    Approximately half of all states, including Ohio, have statutes that require employers to allow employees to store firearms in their own personal vehicle. However, employers can restrict employees from storing weapons in company-owned vehicles. They can also restrict firearms from coming into their place of business, but they cannot prohibit firearms from being locked in a car in the parking lot.

    All workplaces, regardless of their size, should have a firearms policy in their employee handbook or company manual. While policies restricting an employee’s ability to possess a firearm at their place of employment or during work time can help to protect other employees and the employer from liability, employers should also be aware of state laws that protect an employee’s right to possess firearms.

    Currently, prohibiting employees from carrying a firearm on his or her person while working or from having guns in the employer’s workplace is permissible in every state. However, laws do vary from state to state, so prohibiting employees from having firearms in their personal vehicles—even in a company parking lot—and discriminating against gun owners in hiring or in regard to the terms and conditions of employment can result in liability in many states. As mentioned earlier, employers should seek advice from competent legal counsel when drafting their policies limiting employees’ ability to possess guns.

    Be aware of triggers

    In addition to instituting firearms policies, and since employees depend on their employer to provide a safe workplace within the confines of state and federal laws, all employers should be aware of potential situations or scenarios that might be of concern such as:

    • a disgruntled employee who was recently fired;
    • a co-worker with substance abuse issues and/or mental illness;
    • volatile events (i.e., strikes, protests); and
    • an employee having marital or custody issues

    These can be triggers for workplace violence and workplace shootings. Therefore, employers should always follow these three steps to provide a safe work environment:

    Step No. 1: Acknowledge employees’ concerns for safety.

    Step No. 2: Establish clear gun policies and procedures for the workplace.

    Step No. 3: Educate employees on safety measures in place for their protection.

    Employers who follow all the above steps can help to avert a potentially tragic situation. 

    Timothy A. Dimoff, CPP, president of SACS Consulting & Investigative Services, Inc., is a speaker, trainer and author and a leading authority in high-risk workplace and human resource security and crime issues. He is a Certified Protection Professional; a certified legal expert in corporate security procedures and training; a member of the Ohio and International Narcotic Associations; the Ohio and National Societies for Human Resource Managers; and the American Society for Industrial Security. He holds a B.S. in Sociology, with an emphasis in criminology, from Dennison University. Contact him at info@sacsconsulting.com.


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  • Next up: When You Can’t Fire Employees at Will
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  • When You Can’t Fire Employees at Will

    At-will employment does have limitations when it comes to terminating employees. Read on below for some things to keep in mind before you fire someone.

    Employment at will—the right to terminate a work relationship for any reason or no reason at all—is a state law concept structured to give both businesses and workers flexibility and mobility. For employers, employment at will obviously provides great latitude concerning staff management and it can help facilitate decisions related to seasonal and holiday workers, outsourcing, probationary periods, and policy effectiveness. Forty-nine states recognize employment at will as the default employment relationship (Montana being the exception).

    But employment at will is not an employer’s carte blanche and the doctrine does have its limitations. While an employer need not necessarily give a reason for terminating an employee at will, if a reason is given, it must be a permissible one. Even when no reason is given, the circumstances of the termination might imply an impermissible motive underlying the termination. Further still, the relationship between the employer and employee may evolve over time to imply something more than at-will status.

    Employers should always pause and assess the situation before opting for termination.

    Personal characteristics and immigration status

    Anti-discrimination laws, spearheaded by Title VII of the Civil Rights Act of 1964, prohibit workplace discrimination based on race, gender, national origin, or religion. Other state and federal laws have expanded anti-discrimination protections to age, sexual orientation, pregnant females, and new mothers.

    It is permissible to refuse employment or terminate an existing employee if their immigration status prohibits them from working; however, federal statutes like the Immigration Reform and Control Act (IRCA) prohibit hiring and firing decisions made based on legal alien status.

    Pretextual termination

    A perfectly legal basis for termination might later be perceived or characterized as pretextual for something more insidious, potentially making the circumstances surrounding a termination relevant to a wrongful termination lawsuit. Common examples of pretextual termination include releasing an employee before he or she qualifies for retirement benefits, or coercing an employee’s departure through uncomfortable or inhospitable work conditions in order to avoid paying severance.

    Not cooperating with company investigations

    Generally, employees might refuse to cooperate with a company investigation—a property search or drug test, for example. It is also generally alright for a company to respond to such refusal with a termination letter. But there are situations where non-cooperation is not proper grounds for terminating an employee at will. The federal Employee Polygraph Protection Act, for example, prevents termination for refusal to take a lie detector test.

     First Amendment rights

    While the First Amendment to the U.S. Constitution broadly protects freedom of speech, the Constitution generally regulates only government activities and its application to private employers is therefore limited. However, some types of speech, such as politically expressive speech, operate in a gray area. While several states have extended protection for political speech to private employees, Ohio is not among them.

    Other speech, such as discussions about workplace conditions and acts contrary to public policy, remain in the sphere of protection. Let’s delve into them.

    Politics affecting workplace conditions

    The National Labor Relations Act prohibits employers from banning discussions about workplace conditions, including how the political climate or the outcome of a particular election might impact the workplace. By logical extension, employers also cannot fire terminate employees for such discussions.

    Under the U.S. Supreme Court’s infamous decision in Citizens United v. FEC, 130 S. Ct. 876 (2010), which held that corporations have a right to make independent political expenditures under the First Amendment, employers can communicate directly to employees about elections, encourage them to vote for certain candidates, and, in many states, even compel them to do political work or attend political gatherings during work hours and for compensation.

    In a legislative parallel, the Civil Service Reform Act of 1978 prohibits discrimination (up to and including termination) of a public employee for his or her political affiliation. This protection has not found widespread purchase in the private sector. Ohio has no such employee protections, but it does require employers to allow for “reasonable” time off to vote at the polls. See R.C. 3599.06.  

    Retaliation

    Employers cannot terminate employees simply for attempting to defend or assert their rights. For example, consider an employee who files a good faith lawsuit for workplace discrimination; the employer cannot terminate the employee out of hand just for bringing the lawsuit. A court could find that such a termination was retaliatory.

    Another point of retaliation might be an employee challenging the business on public policy grounds. Public policy is an amorphous talking point in the law, but in our context the heart of it is to encourage acts that the public would view as morally or ethically positive and discourage those which are not. An employee’s refusal to commit an illegal act, reporting an employer’s illegal act (i.e., whistleblowing), or exercising a legal right (e.g., voting) are all favored by public policy and may not be used as a basis for termination.

    Implied contracts

    Sometimes, an implied contract can arise from an employment at will relationship. Such an implied contract could arise from representations by the employer that suggest job security to the employee. Courts will often carve out or limit an employer’s otherwise blanket right to terminate based on these kinds of representations. In some states, even at-will policies in employee handbooks can be amended or nullified by an employer’s subsequent representations and assurances. See, e.g., Wilson v. General Motors Corp., 454 N.W. 2d 405 (Mich Ct. App. 1990).

    Most of the prohibitions on termination that we’ve discussed require the employer to take some conscious (often contentious) action. An implied contract, though, can form from the most innocuous of conversations. Hence, employers should be careful about representations made to employees in any circumstance.

    Max Julian is an attorney at The Gertsburg Law Firm. Julian’s practice is focused on commercial litigation. He can be reached at mj@gertsburglaw.com or by phone at (440) 571-7541.


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  • Next up: Five Tips to Improve Your Heart Health
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  • Five Tips to Improve Your Heart Health

     

    Your heart is made up of muscle, blood vessels and valves that work together to pump blood to all areas of your body. Two common risk factors for your heart health are high blood pressure and high cholesterol. Both of these conditions can cause damage to your heart, which can lead to serious health issues like a heart attack or stroke.

    So how can you combat heart disease? See the tips below to work on creating a healthier you.

    1.       Get physical

    Living an active lifestyle is a key component to heart health. Staying active helps you maintain a healthy weight, which aids in the prevention of high blood pressure, type 2 diabetes and high cholesterol. Physical activity also improves blood flow throughout the body and supports your immune system. By aiming for 30 to 60 minutes of activity a day, you can easily reduce your chances of heart disease.

    2.       Fuel your body

    Another way to prevent heart disease and manage your weight is by eating a heart-healthy diet. Include plenty of fruits, vegetables, beans/legumes, whole grains, low sodium foods and low-fat dairy products in your diet. These foods provide vitamins and minerals to your body, while foods that contain high amounts of saturated fats, trans fats, sugar and salt put you at risk of developing clogged arteries that can lead to a heart attack. 

    3.       Know your numbers

    The only way to know for sure if you are in danger of heart disease is by getting regular health screenings. Tests that can indicate risk of heart disease include blood pressure screenings, type 2 diabetes screenings or a lipid panel. By knowing your numbers, you can take the first step to improving your overall health.

    4.       Say no to nicotine

    Nicotine increases your blood pressure and contributes to the hardening of the artery walls, increasing your risk for heart attacks. Cigarette smoke specifically limits the amount of oxygen in your blood, therefore causing your heart to work even harder to supply enough oxygen to the body. Even if you aren’t a smoker, be sure to steer clear of secondhand smoke.

    5.       Don’t sweat the small stuff

    Constant stress may increase your tendency to turn to harmful behaviors that raise your blood pressure such as heavy eating, drinking alcohol or smoking. If you experience stress for long periods of time, talk to your doctor about stress management and seek out healthy alternatives to these behaviors.

     

    For more information, please talk to your doctor. If you are a COSE MEWA member through Medical Mutual, use our provider search tool to get started. To learn more about the wellness benefits offered through a COSE MEWA health plan, please contact your broker or your Medical Mutual Sales representative.

     

    Sources: Mayo Clinic, American Heart Association, Centers for Disease Control, American Medical Association

     

    The material provided is for your information only. It does not take the place of your doctor’s advice, diagnosis or treatment. You should make decisions about your care with your doctor. What is covered by your health insurance will be based on your specific benefit plan.

     

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  • Next up: Five Ways to Get More from Your Vision Benefits
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  • Five Ways to Get More from Your Vision Benefits

    Who doesn’t want to get the most out of their vision benefits? Courtesy of our partners at VSP® Vision Care, here are five ways you and your employees can easily maximize your vision plan.

     

    A Vision plan is an important part of an employee’s benefits package. Just having benefits is good but enjoying low out of pocket costs is great! Make sure you and your employees are getting the most out of your vision plan by following the five tips below. 

    How to maximize your vision benefits:

    1. Know what your plan covers
    For example, if you’re enrolled in VSP, you can go to vsp.com, create an account and see your detailed benefit information. Easily find information like co-pays, frame allowance, extra savings and lens enhancement coverage. 

    2. Find a conveniently located in-network eye doctor
    You’ll get the most out of your benefits and save more when you visit a VSP network provider. Plus you can get additional member savings and bonus offers when you choose a doctor who participates in the VSP Premier Program

    If you already have an eye doctor, verify that they’re in-network so you don’t miss out on significant savings. Some places say they “accept” VSP, only to offer a limited discount or out-of-network benefits and that can mean you’ll pay a lot more out of your pocket.

    3. Choose from a wide selection of stylish frames and lenses
    A lot of thought goes into choosing the perfect frame when you’re buying eyewear. Before making your choice, research the quality of the frame and lens materials being used because those factors can make a huge difference in your out of pocket cost and overall satisfaction. 

    You can also get more bang for your buck by checking out special offers on featured frame brands and popular lens enhancements like anti-reflective coatings, progressives, and light-reactive (photochromic) lenses.

    4. Take advantage of your second-pair eyewear discount 
    Many people don’t realize that you can save up to 20% on a second pair of glasses when you purchase from your VSP network eye doctor within 12 months of your last eye exam.  

    5. Get in-network savings shopping on-line
    If you prefer to shop online, check out Eyeconic. You can connect your VSP insurance coverage with your eye doctor’s expertise—all while enjoying in-network savings. Most VSP members can use their vision benefits to buy eyeglasses, prescription sunglasses, and contacts. Eyeconic can fulfill most prescriptions, including progressive lenses and multiple lens treatments. If you’d still like to have assistance from your VSP doctor’s office for that perfect fit, they can send your glasses directly to your doctor at no-cost to you. The best part, you can try before you buy using their virtual try-on tool, from the comfort of your own home!

    *Available only to VSP members with applicable plan benefits. Frame brands subject to change.
    **Savings based on doctor’s retail price and vary by plan and purchase selection; average savings determined after benefits are applied. Available only through VSP network doctors to VSP members with applicable plan benefits. Ask your VSP network doctor for details.

    Make vision health a priority, starting with scheduling a comprehensive eye exam. If you haven’t already, take advantage of your COSE member benefit and opt-in to VSP vision insurance. Contact your COSE sales representative or broker for more info.

     
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  • Next up: Gen Z: 7 Must-Have Characteristics They Want in a Job
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  • Gen Z: 7 Must-Have Characteristics They Want in a Job

    In just a couple short years, Generation Z is expected to comprise a fifth of the workforce. If you want to successfully attract this talent, make sure you tailor your positions to the following seven characteristics this generation wants in a job.

    Generation Z, those born after 1995 and are just entering the workforce, are different than any generation that has come before them. They are a thoughtful generation in making decisions and that is especially true when it comes to accepting a job. Read on below for a list of the seven things that matter most to this generation in their job search.

    Growth opportunities

    Generation Z plans to change companies no more than four times in their career. Thus, it is important to them to work for a company who offers growth opportunities. From the initial interview through annual performance reviews and everything in between, this generation will be challenging their managers to show them a path. They will want to understand what opportunities are present both inside and outside of the company.

    Generous pay

    This generation watched their parents struggle through a recession. They understand money doesn’t grow on trees and that you must work hard for what you have. They expect to work harder than any prior generation, but they also expect that their salaries match their effort. Generous pay is a priority to them.

    Making a positive impact

    Philanthropists at heart, Generation Z wants to work for companies that are making a positive impact. They want to know the companies they work for are good corporate citizens and are doing good for the communities in which they operate.

    Job security

    Because this generation doesn’t want to change jobs often, it is important to them to know they have job security. They want to feel comfortable in their roles and know that if they work hard, they will have a job.

    Healthcare benefits

    With the ever-changing political scene surrounding healthcare, it is no wonder this generation wants to ensure that they have good healthcare benefits.  It is important not only that they have coverage, but good coverage.

    Flexible hours

    Like the millennials that came before them, Generation Z would like to see flexible hours. Unlike millennials, they prefer to do their work in a traditional office setting with small groups.

    A manager to learn from

    Managers to learn from are becoming an increasingly important attribute. Generation Z wants to learn from their manager as they would like to stay in their companies and grow. Who better to learn from than the person who is leading you?

    If these are the factors that are important to Generation Z, do you feel your company is ready to meet their demands? How might you change your internal policies? With this group becoming 20% of the workforce in 2020, time is of the essence. 

    Ashley Basile Oeken is president of Engage! Cleveland, a nonprofit whose mission is to attract, engage and retain young, diverse talent to the Greater Cleveland area. Learn more about her organization’s work by clicking here.


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