Overtime Exemptions and Misclassification


Updated

Jul 24, 2018

Federal law requires that most employees who work more than 40 hours a week receive overtime pay. To avoid paying this extra money, companies sometimes give their workers “inflated” job titles and claim they are therefore exempt from receiving overtime under federal law. This tactic, known as “employee misclassification,” is not only unethical, it is illegal. At Morgan & Morgan, our attorneys help victims of employee misclassification recover compensation for wages they were wrongfully denied.

If you’ve worked more than 40 hours a week without overtime pay, fill out our free case review form today to find out more about your legal rights. Under federal wage and hour law, you may be able to obtain up to three years’ worth of unpaid wages. Because there are time limits in which an overtime lawsuit may be filed, it is important that you contact us as soon as possible if you suspect you’ve been misclassified.

What Types of Workers Are Exempt From Overtime Pay?

Under federal wage and hour law, only certain, specific categories of employees are exempt from federal overtime laws. Employees who fit into these categories are not entitled to overtime pay when they work more than 40 hours a week.

It is important to note that just because your employer says you’re exempt from overtime pay doesn’t mean you actually are. You must meet the criteria described below to be truly exempt from overtime pay. Moreover, even if some of your job duties fit within one of the exemptions, if the majority of your time is spent on tasks that fall outside of the exemption, you may be eligible to receive overtime pay. Employees who are paid less than $455 per week are eligible to receive overtime and do not fall into any of these federal exemptions, regardless of their job duties.

Federal wage and hour regulations set forth the following exemptions:

Executive Exemption: To qualify for the executive exemption, the employee’s primary job duty must be either managing the company or a department/subdivision. Executive employees must also direct the work of at least two other full-time workers. In addition, to qualify for the executive exemption, the employee must have the authority to hire or fire other employees or, at the very least, the company must use the employee’s recommendations when making personnel decisions.

Administrative Exemption: The administrative employee’s primary duty must be the performance of “office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers.” To qualify for the administrative exemption, the employee’s primary job duties must include the exercise of discretion and independent judgment regarding matters of significance. According to the Department of Labor, “the exercise of discretion and independent judgment involves the comparison and evaluation of the possible courses of conduct and acting or making a decision after the various possibilities have been considered.” It is important to note that clerical workers, employees classified as “administrative assistants,” and secretaries usually do not fit the requirement of the administrative exemption and are generally entitled to overtime pay under federal law.

Professional Exemption: Under the professional exemption, the employee’s primary duty “must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment.” To qualify for the professional exemption, the employee’s advanced knowledge must be in a field of science or learning and must be “customarily acquired by a prolonged course of specialized intellectual instruction.” Doctors, accountants, teachers and engineers typically fall under the professional exemption.

Computer Employee Exemption: This exemption applies to certain computer systems analysts, programmers and software engineers. To qualify for this exemption, the employee must make more than $27.63 an hour. The computer employee exemption does not apply to help desk workers or employees who manufacture and repair computer hardware and related electronic devices. In recent years, there have been a number of lawsuits filed on behalf of tech support and help desk workers who were not paid overtime because their employers misclassified them under this exemption.

Outside Sales Exemption: This exemption applies only to employees whose primary duties are making sales or obtaining signed contracts for services. To qualify for this exemption, the employee must be customarily and regularly engaged in sales away from the employer’s place of business. Salespeople who primarily work out of a corporate office do not qualify for this exemption and may be entitled to overtime pay.

Example of Employee Misclassification – The “Assistant Manager”

Companies often give employees job titles such as “manager,” “assistant manager,” or “supervisor” and use this inflated job title to justify not paying their staff overtime. This practice is particularly common in the retail and restaurant industries.

For instance, assume an employee is a cashier for a clothing store and gets promoted to assistant manager. Even though the employee gets an increase in pay, he continues to work the cash register, stock shelves and greet customers. He is not allowed to manage other employees or hire and fire people. The clothing company tells the worker that he is a manager and therefore exempt from overtime pay, even though his job duties never changed – only his title. In this situation, the worker may be able to file a lawsuit alleging that he was misclassified and illegally denied overtime wages.

Can Salaried Workers Receive Overtime?

Yes, many salaried employees who work more than 40 hours a week are eligible to receive overtime under federal law. Companies sometimes tell their employees that because they are paid on a salaried basis, rather than hourly, they are not entitled to receive overtime. Such claims are simply not true. Unless your job duties fall into one of the narrow exemptions to federal overtime requirements, your company should be paying you overtime even if you are paid a salary.

Independent Contractor Misclassification

While federal law requires companies to provide employees with overtime, no such requirement exists for independent contractors. As such, many companies misclassify employees as “independent contractors” to avoid paying them overtime and providing them with benefits.

Whether you are an independent contractor in the eyes of the law depends on your actual job duties and responsibilities. The federal government uses a multi-factor test to determine if a worker has been properly classified as an independent contractor. You may be an employee and not an independent contractor if:

  • The company exerts a high level of control and instruction over the work you do (for example, the company directs when, where and how your work is done)
  • Your work hours are set by the employer and you do not have the freedom to make your own schedule
  • The company provides you with the tools and materials needed to perform the job (an independent contractor usually must supply his or her own tools and work materials)
  • You usually work for just one company (an independent contractor usually provides services to more than one company)

If you think you’ve been misclassified, it is important that you talk to an attorney to see if you’ve been cheated out of overtime wages. Contact Morgan & Morgan today and find out how we can help.

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