Tag Archives: exempt employees

Does Non-Payment of Wages to an Exempt Employee Give Rise to an FLSA Claim?

The Fair Labor Standards Act (“FLSA”) is the federal law that establishes, among other things, that employees who are classified as “non-exempt” are entitled to be paid a minimum hourly wage and overtime pay when working more than 40 hours in any workweek.  A person who brings a successful FLSA lawsuit is also entitled to attorney’s fees and liquidated damages. Generally, and conversely, “exempt” employees are those who are exempt from the minimum wage and overtime provisions of the FLSA.  Exempt employees must be paid on a salary basis (and a minimum statutory required under the FLSA) and must perform certain duties.  Exempt employees include executives, administrators, and professionals.

The question that we are considering now is this: when an employer fails to pay one or more weeks of pay to an exempt employee whose exempt status is not in dispute, does that render the employee non-exempt and, therefore, entitle such employee file a lawsuit for violation of the FLSA and, in so doing, recover the lucrative damages and other relief thereunder?  The short answer is no. 

The Southern District of Florida considered this very issue in the case of Tadili v. Ferber, 12-80216-CIV, 2013 WL 12101132, at *2 (S.D. Fla. Nov. 22, 2013).  In that case, the plaintiff, an master dental technician (exempt as both a learned professional and a highly compensated employee), made the “convoluted argument” that since he did not receive his salary for five of the seven weeks he worked, he could not be considered an exempt employee.  The court noted, “An employee who is either a learned professional or a highly paid employee who is not paid for work performed may have a breach of contract claim for nonpayment of wages, but such employee will not have an FLSA claim.” The fact that the employee was not paid did not allow him to claim he was entitled to a minimum wage as a non-exempt employee.  Based on this reasoning, the court went on to grant the defendant’s motion for summary judgment.

Other cases holding that non-payment of wages to an otherwise exempt employee does not give rise to an FLSA claim include Nicholson v. World Bus. Network, Inc., 105 F.3d 1361 (11th Cir. 1997) (notingCongress’s intent in formulating the FLSA was to protect “poorer and powerless” workers, whereas the exemptions are carved out for those in higher employment positions who do not require such protections), and Orton v. Johnny’s Lunch Franchise, LLC, 668 F.3d 843 (6th Cir. 2012).  See also Donovan v. Agnew, 712 F.2d 1509 (1st Cir. 1983).

It is not unusual for an employer to run into cash flow issues and be unable to meet their payroll obligations.  When this occurs, employees may rush to hire legal counsel to sue, and savvy plaintiff’s attorneys know that the FLSA is the best and most lucrative basis for a collections claim.  Additionally, the FLSA allows employees to personally sue business owners and managers as well if they come within the definition of “employer” under the statute.  These lawsuits are often tough to defend (because liability is clear) and costly (because the statute provides for attorneys’ fees and liquidated damages).  However, if the employee bringing the lawsuit is clearly exempt – based on their salary and their duties – the foregoing line of cases should knock the wind out of plaintiff’s counsel’s proverbial sails.  No attorney can continue to litigate a claim in federal court unless the facts alleged are supported by the evidence and are warranted under existing law or a non-frivolous argument to modify the law.   

As always, when faced with these issues or served with an FLSA lawsuit – or even a demand letter – the best practice is to always consult legal counsel.  Whatever you do, do not ignore the threat of an FLSA lawsuit or actual claim.   

Ellen M. Leibovitch

Board Certified Labor & Employment Lawyer

ASSOULINE & BERLOWE, P.A.

2101 N.W. Corporate Blvd., Suite 410

Boca Raton, Florida 33431

Main: 561-361-6566
Direct: 561-948-2479

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eml@assoulineberlowe.com

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Significant Changes to Overtime Regulations!

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Just this week, the Department of Labor (DOL) released its much-anticipated final changes to the overtime regulations under the Fair Labor Standards Act (FLSA). The new guidelines will go into effect on December 1, 2016, so now is the time for covered employers to start preparing.

What has changed?

Most significantly, the new rules change the salary requirements for exempt employees. Under the old rules, employees could be classified as exempt from overtime if they were earning a salary of $455/week (or $23,660/year) and if they performed exempt professional, managerial, executive or administrative duties. Under the new rules, however, employees must earn $913/week (or $47,476/year) – MORE THAN DOUBLE THE PRIOR SALARY LEVEL – to meet the salary component of the exemption. The salary threshold will automatically be updated every three years, so this is a moving target. Note that the final rule did not include a change to the duties test.

Also, the new rule raises the salary threshold level for the highly compensated employee (HCE) exemption from $100,000 to $134,004. To be exempt, a HCE must customarily and regularly perform any one or more of the exempt duties or responsibilities of a professional, managerial, executive or administrative employee and have the primary duty of performing office or non-manual work. Like the standard salary level, the highly compensated employee salary level will increase every three years, beginning Jan. 1, 2020.

What does this mean?

For exempt employees earning at least $913/week, nothing will change. However, employees who are now classified as exempt but who are earning less than $913/week will lose their exempt status as of December 1, 2016. Becoming non-exempt means that these employees will be eligible for overtime pay when working over 40 hours in a work week, which also means that these employees will be required to record their hours worked. For exempt employees who never “punched a clock,” this may be demoralizing, although some may welcome the opportunity to earn overtime.

Note that employers will be able to count non-discretionary bonuses, incentive payments and commissions toward as much as 10% of the salary requirement. However, such payments must be made on at least a quarterly basis.

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What should you do?

Step 1: EVALUATION

  • Determine which employees will be impacted by these new rules, if anyone.
  • Assess the cost of reclassifying these employees as non-exempt or increasing their salaries in accordance with the new guidelines to keep these employees exempt.
  • For employees who will be reclassified as non-exempt, no additional costs will result:
    • if the newly non-exempt employees do not work overtime. Remember that even if you have a policy that requires all overtime hours be approved in advance, non-exempt employees who work over 40 hours a week must be paid at the time and one-half rate.
    • if the hourly rate paid to the newly non-exempt employees is reduced to take into account the need for these employees to work some overtime hours each week.
  • Remember to train all newly-exempt employees on your time-keeping procedures.

Employers impacted by these new rules may need to consider covering increased overtime costs by reducing benefits, but this will certainly result in a drop in employee morale.

Step 2: COMMUNICATION

  • Notify impacted employees that changes are the result of new rules imposed by the DOL rather than a company decision
  • Assure reclassified employees that the changes do reflect the employer’s opinion of their work or the employees’ value to the company

As always, you should contact legal counsel for any specific questions you may have about the applicability of the FLSA to your business, these new rules and how to best implement same.

Ellen M. Leibovitch

Florida Board Certified Labor and Employment Attorney

ASSOULINE & BERLOWE, P.A.

1801 N. Military Trail, Suite 160

Boca Raton, Florida 33431

Main:  (561) 361-6566

Fax: (561) 361-6466

Email: EML@assoulineberlowe.com

http://www.assoulineberlowe.com/

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