Avoiding Improper Employee FLSA Classifications

Employment Law

Avoiding Improper Employee FLSA Classifications

Jun 26, 2023 | Employment Law

In a prior post, I discussed the five “white-collar” exemptions to the Fair Labor Standards Act’s (“FLSA”) minimum wage and overtime pay requirements. This post addresses the consequences of improperly classifying employees as exempt, identifies common classification mistakes, and offers suggestions and recommendations to ensure proper classification.

Consequences of Improper Classification 

The ramifications of improperly classifying employees as exempt under the FLSA can be significant. First, an employer may be the subject of a Department of Labor (“DOL”) investigation, which can result from an employee complaint or be conducted as part of a targeted industry investigation. The DOL can supervise the payment of back wages and liquidated damages (also known as “double back pay”) owed to employees who were improperly classified. Second, an employer may be sued by an employee or the DOL for back wages, liquidated damages, attorneys’ fees, and/or injunctive relief preventing further violations. Notably, personal liability may be imposed on the employer’s officers, directors, and/or those employees who are “responsible” for the violation (based on an “economic reality” test). Third, the DOL can impose civil money penalties on employers. Finally, criminal prosecution is possible for “willful” FLSA violations.   

Common Pitfalls

The following are common classification mistakes:

  • Classifying all “salaried” employees as exempt without regard to the employees’ duties. An employer cannot make an employee exempt simply by paying the employee a salary as opposed to an hourly rate. It is imperative that the employer evaluate the employee’s duties in relation to each of the white-collar exemptions.
  • Classifying all “supervisors” or “managers” as exempt. The executive exemption does not automatically apply to all employees with management responsibilities or titles. To qualify for the executive exemption, an employee must have management as his primary duty, regularly and customarily direct the work of at least two employees and have the authority to hire and fire employees or significant input regarding such decisions.
  • Classifying based on job titles and descriptions alone. While job titles and descriptions can be helpful in evaluating exemption status, each employee must be evaluated on a case-by-case basis to determine whether the employee is exempt.  
  • Classifying all highly educated employees as exempt. This approach ignores whether the employee actually performs exempt duties.
  • Classifying employees as exempt because they are “well paid.” There are many well-paid and valuable employees who do not qualify for an FLSA exemption. Unless an executive, administrative, or professional employee earns at least $107,432, the employee must still meet all the requirements for the relevant exemption, and even if an employee earns $107,432, the employee must still perform at least one exempt duty.
  • Classifying ALL employees as exempt. Although it is technically possible for all employees of a business to be exempt if they meet the requirements, it is rare. Most businesses have employees whose primary duties do not qualify them for an exemption.

Tips to Ensure Proper Classification

The following are practical tips to ensure the proper classification of employees as exempt or non-exempt:

(1)            Evaluate each employee individually.

(2)            Do not rely on job titles and/or descriptions alone.

(3)            Do not assume that all workers with the same title or at the same level should be classified the same.

(4)            Consult the DOL Fact Sheet for each exemption.

(5)            Consult your attorney to conduct a thorough analysis of classifications.

If you have questions or concerns regarding FLSA exemptions or other employment matters, please contact Maureen Carr at mcarr@beankinney.com.

This article is for informational purposes only and does not contain or convey legal advice. Consult a lawyer. Any views or opinions expressed herein are those of the author and are not necessarily the views of any client.


Follow us on LinkedIn to view the latest blogs from our team.

About – Business Insights

Our business blog focuses on issues affecting Virginia, D.C. and Maryland business owners as well as those in other jurisdictions throughout the country. We provide timely insight and commentary on federal and state rules and how they affect you. If you are interested in having us cover a specific topic, please let us know.

About – Employment Law

As employment law constantly changes, the attorneys at Bean, Kinney & Korman stay up to date on the law as it develops. Our blog topics focus on those changes and what you need to know about them, ranging from severance agreements and the FLSA to social media in the workplace and recent court decisions. If you are interested in having us cover a specific topic, please let us know.

About- Real Estate

This blog focuses on real estate, land use and construction-related topics affecting Virginia and the Washington, D.C. metro area. With topics ranging from contract drafting and negotiation to local and regional land use project updates, the attorneys at Bean, Kinney & Korman provide timely insight and commentary on the issues affecting owners, builders, developers, contractors, subcontractors and other players in the industry. If you are interested in having us cover a specific topic, please let us know.

EEOC Doubles Enforcement Effort Against Employers in FY2023

The U.S. Equal Employment Opportunity Commission (“EEOC”) recently released its FY 2023 Office of General Counsel (“OGC”) Annual Report reflecting the agency’s litigation efforts to enforce federal anti-discrimination laws for the fiscal year ending September 30,...

The Employee’s Handbook to Holiday Work

The holiday season often brings a surge in work hours, especially for those in the retail and service industries. This period, while potentially lucrative for both employers and employees, also brings with it questions about holiday pay, overtime, and legal rights....

NLRB Delays Start Date for New Joint Employer Rule

On October 26, 2023, the National Labor Relations Board (NLRB or Board) issued a new rule, with an effective date of December 26, 2023, establishing the standard for determining joint employer status under the National Labor Relations Act (NLRA). The NLRB’s new rule...