It is being reported there has been a 77% increase in Fair Labor Standard Act (FLSA) claims against employers alleging wage and hour violations since 2004. A large number of the claims and probably the most expensive have been about disputes over underpaying or failing to pay overtime to employees due to job misclassification.

Most recently AT & T was sued for $1 billion dollars in two class action suits, alleging a new company-wide policy exempting first line managers from overtime, violated federal law. The first line managers claimed they fill low level supervisory positions, and they do not meet the standards established to qualify as “exempt” employees.

To avoid this type of costly FLSA claim:

  • 1. Conduct a comprehensive job analysis to determine if someone is an “exempt or a non-exempt employee.” Jobs are classified as non-exempt or exempt based on:
  • Nature of the work performed,
  • The extent of the discretion exercised in the job,
  • Level of compensation, and the education, training, and
  • Credentials of the person filing the position.

2. Once employees are properly classified as exempt or non-exempt, do a check to insure employees’ wages and benefits match their federal FLSA exempt or non-exempt status. If their wages and benefits do not match their FLSA status, correct the problem immediately.

Astronomical claims by employees against their employers, and the wide-spread press coverage they receive are sure to lead to copycat cases against smaller and mid-size employers. Costly FLSA claims over job misclassifications can be easily avoided with a moderate amount of effort by employers.