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Davis Brown Employment and Labor Law Blog

Exempt or Non-Exempt - June 27, 2012

That is a question Hamlet never had to answer and would have added a whole new dimension to his angst. 


Wage Hour claims have exploded across the country with the Department of Labor becoming involved in cases and individual who is, or is not, exempt is an area of the law where there is focused consideration and class action law suits ranging from donning and doffing to how Walmart greeters are paid. What is eminently clear from the significant number of cases, settlements and complaints is that exemptions and other wage hour issues are fluid and fact dependent. In fact, something that you might consider to be written in stone, that a manager is exempt, formed the basis of over 15 lawsuits covering more than 6,000 current and former employees of Rite-Aid.  Rather than continue on with expensive and time-consuming class action litigation, Rite-Aid Corporation preliminary settled this month for 20.9 million dollars for these assistant store managers and co-managers who were salaried and allegedly denied overtime pay. The settlement has been preliminarily approved by the US District Court for the middle district of Pennsylvania.


Settlements such as these leave open some key questions regarding how certain wage hour laws are applied.  Practical takeaways include the primary question, are your managers actually managing? If a manager is really just a "team lead" or first among equals, the Department of Labor and the court system may not consider that this person has enough authority to fit within an executive or other managerial exemption. There have also been instances, including in Iowa, where the Department of Labor representatives and investigators have indicated that if we have an exemption based on how many people an employee supervises, i.e. the two or more supervision rule, factual changes can undermine the exemption. If one of those employees who are supervises are out for an extended leave, such as Family and Medical Leave, that might mean that the "manager" is no longer managing and therefore, non-exempt for that period of time. Another key issue is failure to understand what employees are actually doing in the workplace. This is particularly true of companies who have multiple sites and where evaluation and review of employee behavior is highly decentralized. In one place or site, a manager might have significant authority while at another site the manager has less authority due to behavior patterns of regional managers and others. Failure to create consistent job responsibilities and duties can result in the decertification of an entire exempt class, just as payment based on hourly work or overzealous deductions from pay can also result in the loss of the exemption. The key take-away from the complexity of this litigation and its frequency is to truly understand the functions your employees are performing and to match those to exemptions carefully and consistently.