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November 27, 2007
Answering the Exemption Question

By Catherine Moreton, J.D.

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Exempt or nonexempt? Participants in BLR's 2007 Employment Law Update preconference workshop received expert advice on just this question Wednesday afternoon in Orlando, Florida.

Determining whether a job is exempt under the Fair Labor Standards Act (FLSA) is very important in this age of class actions and litigation, said Stephen R. Woods and M. Kristen Allman, partners in the law firm of Ogletree, Deakins, Nash, Smoak & Stewart, PC.

The two seasoned labor and employment law attorneys noted that plaintiff's lawyers love the FLSA for a number of reasons, including that the law provides for collective causes of action that can yield large monetary awards, opportunities for liquidated damages, and the recovery of attorney's fees. If a plaintiff's attorney can find a situation where a company has misclassified a large group of workers, he or she can represent the entire group in a collective action with big awards of attorney's fees, said Allman.

Trouble spots include two common situations faced by HR professionals, said Woods. In general, either the jobs were incorrectly classified from the start or the job duties have changed and the job classification hasn't been updated. It is often impossible to review every job classification. So, if it is necessary to prioritize dealing with these situations he said, focus on job classifications where there are a lot of employees in the specific job. If one of these jobs in misclassified the potential liability is multiplied by the number of employees in the job, so they should be a priority.

After detailing the tests for the various FLSA exemptions, including the rules related to deductions from pay, Woods and Allman reviewed job descriptions submitted in advance by workshop participants. They walked through the exemption analysis and pointed out issues to be considered.

One group of jobs reviewed at the workshop related to the hospitality industry. These jobs included restaurant managers, maintenance supervisors, executive housekeepers, and an executive chef. Allman pointed out that these jobs commonly get employers in trouble.

She noted that before the 2004 revisions to the FLSA regulations, the concept of "working foreman" often applied to these classes of jobs. While the term is no longer used, the concept is still instructive. An individual might have some supervisory responsibilities but the primary duties are really the same as the employees being supervised. For instance, a housekeeping supervisor who also cleans rooms on a daily basis would more likely be nonexempt. However, the executive housekeeper who supervises 2 or more housekeepers, schedules employees, orders supplies, and makes sure hotel standards are met might well meet the test for the executive exemption.

It is important to have accurate, up-to-date job descriptions, noted Allman. However, if the Department of Labor comes in to audit your organization, they are going to interview employees and supervisors to find out what the employee is actually doing on the job each day. She recounted a situation where a supervisor was clearly exempt based on the job description. However, when she was interviewed by a DOL investigator, it became clear that she was actually doing a lot of clerical work and the job was found to be nonexempt.

Woods noted that the executive exemption and the outside sales exemption are probably the easiest to apply. Woods and Allman agreed that the test for highly skilled computer employees is probably the most difficult to work through followed by the administrative exemption.

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