Are they Exempt or Nonexempt?
FLSA audits can provide the answer
Recently, there has been an increase in the number of class action suits under the Fair Labor Standards Act (FLSA). The FLSA, also known as the federal Wage and Hour Law, mandates overtime payments to qualifying, or “nonexempt” employees, and has been a legal battleground in the employment world. A main reason for the increase in the number of claims is the grey area between exempt and nonexempt classifications.
Determining whether a job is exempt or nonexempt under the FLSA is very important and experts agree that employers should conduct regular FLSA audits to ensure compliance and to stay out of trouble. Regular audits should be conducted for a number of reasons:
- To reduce the likelihood of a suit because it allows you to identify and correct problems before there are official complaints
- To classify jobs as exempt/nonexempt and ensure that job descriptions are up to date and accurately outline the real duties employees perform each day
- To determine whether supervisors and managers are treating both exempt and nonexempt employees appropriately and consistently under the law
- To be able to show a DOL auditor or an attorney that your company does all it can and in good faith effort to ensure compliance with the FLSA
- To help prepare for a DOL investigation with having data available and to be prepared for questions regarding potential issues.
So, what should a FLSA audit include? The most important thing to remember when conducting a FLSA audit is to focus on the job and not on the job title. Additionally, the following points should be included:
- Be sure position descriptions are up to date and accurate with details regarding essential job duties. This will ensure that position classifications as exempt do fall within the exemptions as provided under the FLSA.
- Check and double check what employees actually do, especially if jobs have changed over time. The best method is to speak with the supervisor or manager as well as the individual in the job to collect the most current information regarding job duties.
- Review and apply the exemption testing standards under the FLSA to determine the correct classification of jobs. Use the most up to date position descriptions as well as data collected from managers and employees regarding specific job duties.
- Review current pay practices, especially overtime calculations, to determine areas that may need improvement to ensure compliance with the FLSA. If changes need to be made to current pay practices, address them immediately.
- Be sure that the latest FLSA-mandated notices are posted in plain sight as required under the FLSA.
- Be sure that compliance is with the latest FLSA regulations.
Non-compliance to the FLSA can be costly. Back pay liability and penalties can quickly add up to millions of dollars. Conducting an internal audit is one of the best strategies to ensure compliance with the FLSA.
As the complexity and broad scope of the FLSA continues to cause uncertainty, it is only through an in-depth analysis into an employer's management and pay practices and how those particular practices measure up to the FLSA requirements, that an employer can be fully assured of its FLSA compliance.
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articles from March 2008 |
