October 01, 2021

Management Misclassification Costs $8M!

In 2016, a class action lawsuit was filed claiming managers who were employed as “in training” or “apprentices” were misclassified as exempt under the Fair Labor Standards Act (FLSA). The claim was based, in part, on the allegation that they performed non-exempt duties such as “food production and customer service” in addition to exempt level duties.

Fast forward to last month and it was reported this case settled for $8M, exclusive of an additional $6M in attorneys’ fees!

Double check your employee classifications under the FLSA. Particularly exempt employees who may perform some non-exempt duties, including front-line supervisors, coordinators, and others. Be sure you also evaluate exempt classifications under your state regulations, if any. Currently, there are at least 20 states that have their own “white collar” regulations that are different from the FLSA!

NOTE: The employer had engaged two “expert” consultants to help develop its business model, including some of the compensation structure. Be sure your business consultants are well-versed in the respective areas for which they provide you with advice and guidance.

Need a wage and hour refresher?  Check out FiveL Company’s archived webcast from September, “Wage and Hour Do’s and Don’ts.” $25 pp