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Apr 20, 2016

By Eric B. Meyer

The U.S. Department of Labor announced this week that “a human resources outsource provider will pay $1 million in back overtime wages and damages combined to hundreds of employees after a U.S. Department of Labor investigation that found widespread Fair Labor Standards Act violations.”

So what did a human resources outsource provider — San Francisco Bay Area-based TriNet — do wrong?

According to the Labor Department, the employer assumed that, by raising employees’ salaries, the company would not have to pay overtime to employees who worked more than 40 hours in a work week. You can read the full Department of Labor press release here.

Myth: Salaried employees can’t receive OT pay

Salaried employees may be exempt; i.e., not subject to the FLSA’s minimum wage and overtime requirements. However, there are multiple criteria that must be satisfied before an employee fits squarely into an FLSA exemption. And figuring out whether an exemption applies is not as easy as Googling a job title or looking at a job description.

Instead, it’s fact-specific, and the burden is not on the employee to demonstrate that he or she is non-exempt. Rather, the employer must demonstrate that the employee is exempt. These exemptions are construed against the employer.

Do the math: For every employee whom you owe $1 in back wages, add another $1 in liquidated damages. Then, multiply that by the number of employees in the same job classification. Then, multiply that by the number of workweeks in which you misclassified these employees.

The statute of limitations under the FLSA is two years (three for willful violations). Plus, in private actions — generally, collective or class actions — you’re going to owe attorney’s fees. Theirs and yours.

That’s a lot of money! Maybe millions (see, e.g., a human resources provider)

So, if a HR provider misclassified its own employees…

How sure are you that your exempt employees are truly exempt? Or that your independent contractors aren’t really employees?

Here’s a better question: When was the last time that you conducted a wage and hour audit? I’m not talking about a self-audit or a call to an HR helpline, but a real employment lawyer giving you real legal advice to help scrutinize your pay practices.

Between this wake-up call of a blog post and the upcoming changes to the overtime rules, if it’s been a while — or, you know, never — now is the time to spend some money now on an audit (rather than a lot more later on).

This was originally published on Eric B. Meyer’s blog, The Employer Handbook.